Micro Cogeneration: Towards Decentralized Energy Systems

M. Pehnt, M. Cames, C. Fischer, B. Praetorius, L. Schneider, K. Schumacher, J.-P. Voß Micro Cogeneration Towards Decentralized Energy Systems

Martin Pehnt, Martin Cames, Corinna Fischer, Barbara Praetorius, Lambert Schneider, Katja Schumacher, Jan-Peter Voß

Micro Cogeneration Towards Decentralized Energy Systems With Contributions by Michael Colijn, Jeremy Harrison, Yasushi Santo, Jon Slowe, and Sylvia Westermann

With 59 Figures

DR. MARTIN PEHNT IFEU INSTITUT FÜR ENERGIEUND UMWELTFORSCHUNG GMBH WILCKENSSTR. 3

DR. BARBARA PRAETORIUS KATJA SCHUMACHER DEUTSCHES INSTITUT FÜR WIRTSCHAFTSFORSCHUNG KÖNIGIN-LUISE-STR. 5

69120 HEIDELBERG 14195 BERLIN DR. CORINNA FISCHER FREIE UNIVERSITÄT BERLIN ENVIRONMENTAL POLICY RESEARCH CENTRE (FFU) IHNESTR. 22 14195 BERLIN

ISBN 10 ISBN 13

LAMBERT SCHNEIDER MARTIN CAMES JAN-PETER VOß Öko-Institut e.V. Novalisstr. 10 10115 Berlin

3-540-25582-6 Springer Berlin Heidelberg New York 978-3-540-25582-6 Springer Berlin Heidelberg New York

Library of Congress Control Number: 2005931799 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer-Verlag. Violations are liable to prosecution under the German Copyright Law.

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Contents

Contents ..................................................................................................... V Introduction............................................................................................. XI 1 Micro Cogeneration Technology ........................................................... 1 1.1 Defining Micro Cogeneration....................................................... 1 1.2 Conversion Technologies ............................................................. 3 1.2.1 Reciprocating Engines........................................................... 4 1.2.2 Stirling Engines ..................................................................... 7 1.2.3 Fuel Cells............................................................................... 9 1.2.4 Other Technologies ............................................................. 11 1.3 Grid Integration, Communication Technology, and Virtual Power Plants ................................................................................................ 13 1.4 Summary of Technologies.......................................................... 16 2 Dynamics of Socio-Technical Change: Micro Cogeneration in Energy System Transformation Scenarios ............................................ 19 2.1 Introduction ................................................................................ 19 2.2 Driving and Embedded: Micro Cogeneration and the Dynamics of Socio-Technical Change .............................................................. 22 2.3 Pluralism of Prophecies: Scenarios of Transformation in Electricity Systems ........................................................................... 27 2.3.1 Types of Energy Scenarios.................................................. 29 2.3.2 Forecasting .......................................................................... 29 2.3.3 Technology Foresight.......................................................... 32 2.3.4 Policy Scenarios .................................................................. 35 2.3.5 Explorative Scenarios.......................................................... 40 2.4 Conclusions ................................................................................ 45 3 The Future Heating Market and the Potential for Micro Cogeneration ............................................................................................ 49 3.1 Current Situation of Micro Cogeneration in Germany ............... 50 3.2 Demand Drivers in the Heat Market........................................... 51 3.3 The Technical Micro Cogeneration Potential: Scenarios for Germany ........................................................................................... 57 3.3.1 Future Heat Demand in the Residential Sector ................... 58

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3.3.2 Future Heating Supply in the Residential Sector................. 61 4 Economics of Micro Cogeneration ...................................................... 67 4.1 Micro Cogeneration Technologies ............................................. 68 4.2 Reference Buildings ................................................................... 69 4.3 Heat and Electricity Supply Scenarios ....................................... 71 4.4 Economic Parameters ................................................................. 72 4.4.1 Energy Prices and Subsidies................................................ 72 4.4.2 Economic Losses or Benefits for Distribution Network Operators ...................................................................................... 74 4.4.3 Economic Perspectives of Different Operators ................... 74 4.5 Micro Cogeneration Electricity Generation Costs...................... 77 4.6 Economic Performance of Micro Cogeneration in Different Buildings .......................................................................................... 80 4.6.1 Independent Operators’ Perspective.................................... 80 4.6.2 Perspective of Vertically Integrated Utilities ...................... 82 4.6.3 Societal Perspective............................................................. 83 4.7 Conclusions ................................................................................ 85 5 Environmental Impacts of Micro Cogeneration ................................ 87 5.1 Life Cycle Assessment of Micro Cogeneration.......................... 88 5.1.1 Considering the Co-product ................................................ 89 5.1.2 Input Data for Micro Cogeneration Systems, Fuels, and Conventional Power Plants .......................................................... 92 5.1.3 Impact Assessment .............................................................. 95 5.2 Results of the Life Cycle Assessment ........................................ 95 5.2.1 Greenhouse Gas Emission Reduction of Natural Gas Micro Cogeneration ................................................................................ 95 5.2.2 Pollutant Emissions ............................................................. 98 5.2.3 Local Impacts from Air Pollutant Releases....................... 101 5.2.5 From Gas to Renewables: Other Micro Cogeneration Fuels ........................................................................................... 107 5.3 Beyond the Single Micro Cogeneration Unit ........................... 109 5.3.1 Avoided Grid Losses ......................................................... 109 5.3.2 Connecting Micro Cogeneration to Create Virtual Power Plants .......................................................................................... 110 5.3.3 Indirect Ecological Impacts through User Behavior ......... 111 5.4 Conclusions .............................................................................. 114 6 From Consumers to Operators: the Role of Micro Cogeneration Users........................................................................................................ 117

Contents

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6.1 Data and Literature ................................................................... 119 6.2 Socio-demographic Characteristics ...................................... 123 6.3 Attitudes ................................................................................... 126 6.3.1 Political Attitudes .............................................................. 126 6.3.2 Technology Attitudes ........................................................ 127 6.3.3 Environmental and Energy Attitudes ................................ 128 6.3.4 Conclusions on Attitudes................................................... 132 6.4 Motives, Goals, and Interests ................................................... 133 6.4.1 Reasons for Considering Fuel Cell Micro Cogeneration... 133 6.4.2 Requirements for Home Energy Supply............................ 134 6.4.3 Micro Cogeneration Technologies in Comparison............ 137 6.5 The Pioneers as Multipliers ...................................................... 139 6.6 Uncertainty as a Barrier............................................................ 140 6.7 Summary and Conclusions: Pioneers for Promoting Micro Cogeneration................................................................................... 141 7 Micro Cogeneration – Setting of an Emerging Market................... 145 7.1 A Changing Environment for Micro Cogeneration .................. 146 7.1.1 Energy Prices..................................................................... 148 7.1.2 The Electricity Market....................................................... 149 7.1.3 The Gas Market ................................................................. 152 7.1.4 Tackling High Transaction Costs and Small Margins....... 153 7.2 The Actor’s Perspective: Strategy, Motivation and Institutions156 7.2.1 Technology Developers..................................................... 157 7.2.2 Gas Supply Industry .......................................................... 159 7.2.3 Large Electricity Companies ............................................. 160 7.2.4 Local Energy Companies .................................................. 162 7.2.5 Customers .......................................................................... 163 7.2.6 Energy Contracting and Service Companies ..................... 164 7.2.7 Distribution Network Operators ........................................ 165 7.3 Incentives and Disincentives for Micro Cogeneration ............. 167 8 Institutional Framework and Innovation Policy for Micro Cogeneration in Germany..................................................................... 171 8.1 Institutional Structures.............................................................. 172 8.1.1 Liberalization of Electricity Markets and Grid Access ..... 172 8.1.2 Energy Taxation ................................................................ 177 8.1.3 Combined Heat and Power Law........................................ 178 8.1.4 European CHP Directive ................................................... 181 8.1.5 Energy-Saving Decree....................................................... 183 8.1.6 Emissions Trading ............................................................. 184 8.1.7 Local Air-Emissions Standards ......................................... 186

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8.1.8 Institutional Barriers.......................................................... 186 8.1.9 Institutional Framework: Discrepancy Between Formal Rules and Actual Effects ............................................................ 188 8.2 Innovation Policy...................................................................... 190 8.2.1 Status of Micro Cogeneration in Policy Strategies............ 191 8.2.2 Research and Development ............................................... 191 8.2.3 Investment Subsidies for Energy Efficiency ..................... 192 8.2.4 Promotional Networks....................................................... 193 8.2.5 Informational Measures..................................................... 194 8.2.6 Innovation Policy: Overshadowed by Large CHP, Outshone by Fuel Cells............................................................................... 195 9 Embedding Micro Cogeneration in the Energy Supply System ..... 197 9.1 Challenges to Security of Energy Supply................................. 197 9.2 Potential Impacts of Micro Cogeneration................................. 200 9.3 Embedding Micro Cogeneration in the Electricity Network .... 202 9.3.1 Equipment Capacity .......................................................... 203 9.3.2 Voltage Variations............................................................. 205 9.3.3 Protection Issues................................................................ 207 9.3.4 Voltage and Current Transients......................................... 207 9.3.5 Transmission and Distribution Losses............................... 208 9.3.6 Ancillary Services and Impacts on Peak Loads................. 208 9.4 Perspectives for Using Renewable Fuels.................................. 212 9.5 Conclusions .............................................................................. 216 10 The Micro Cogeneration Operator: A Report from Practical Experience .............................................................................................. 219 10.1 Starting Situation .................................................................... 219 10.2 Options of Operating a Micro Cogeneration Unit .................. 223 10.3 Practical Experiences with the Concrete Operation of Micro Cogeneration................................................................................... 224 10.4 Practical Experiences with the Regulatory Framework.......... 226 10.5 Public Acceptance .................................................................. 229 10.6 Conclusions ............................................................................ 229 11 Micro Cogeneration in North America........................................... 231 11.1 Micro Cogeneration Status in North America ........................ 231 11.1.1 Previous Attempts to Develop Micro Cogeneration........ 232 11.1.2 The Market Today ........................................................... 233 11.1.3 U.S. Department of Energy Action ................................. 233 11.2 Framework for Micro Cogeneration....................................... 234

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11.2.1 Heating and Cooling Markets.......................................... 234 11.2.2 Electricity Industry .......................................................... 235 11.3 Micro Cogeneration Policy and Incentives............................. 236 11.3.1 U.S. Department of Energy Micro Cogeneration Policy. 236 11.3.2 Solid State Energy Conversion Alliance ......................... 237 11.3.3 U.S. Cogeneration Policy ................................................ 237 11.3.4 Net Metering.................................................................... 239 11.3.5 State-level Incentives....................................................... 239 11.4 Development of Micro Cogeneration Products in the U.S. .... 241 11.5 Conclusions ............................................................................ 242 12 Micro Cogeneration in Britain ........................................................ 243 12.1 Political and Economic Framework........................................ 243 12.1.1 UK Energy Policy............................................................ 243 12.1.2 Implementation of Policy ................................................ 246 12.1.3 Support Measures ............................................................ 246 12.1.4 Independent Bodies and Lobbying Activity .................... 248 12.1.5 Current Issues .................................................................. 248 12.1.6 Legislation and Regulation.............................................. 249 12.1.7 Energy Prices................................................................... 250 12.2 Market Context ....................................................................... 251 12.2.1 Housing Stock and Energy Use ....................................... 251 12.2.2 Climate ............................................................................ 252 12.2.3 Heating Systems .............................................................. 253 12.2.4 Boiler Market................................................................... 253 12.2.5 Technology Developments .............................................. 254 12.3 Major Commercial Activities and Actors in the Country....... 259 12.3.1 UK Energy Industry Structure......................................... 259 12.3.2 Routes to Market ............................................................. 260 12.3.3 Market Status................................................................... 261 13 Micro Cogeneration in Japan .......................................................... 265 13.1 The Energy Situation of Japan................................................ 265 13.1.1 Primary Energy Supply and Power Generation............... 265 13.1.2 Electric and Gas Utilities................................................. 267 13.1.3 Energy Market Deregulation ........................................... 267 13.2 The Reciprocating Engine Micro Cogeneration Market in Japan........................................................................................... 268 13.2.1 Micro Cogeneration for Commercial Use ....................... 269 13.2.2 Micro Cogeneration for Residential Use ......................... 270 13.2.3 Development Initiatives................................................... 272 13.2.4 Prospects for Gas Engine Micro Cogeneration in Japan . 273

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13.3 Fuel Cell Development........................................................... 273 13.4 Conclusions ............................................................................ 275 14 Micro Cogeneration in the Netherlands ......................................... 277 14.1 Introduction ............................................................................ 277 14.2 Potential.................................................................................. 277 14.3.1 Micro Cogeneration Developers in the Market ............... 279 14.3.2 Micro Cogeneration Developers Trialling....................... 280 14.3.3 Other Developers............................................................. 281 14.3.4 Manufacturers.................................................................. 281 14.3.5 Gasunie............................................................................ 282 14.3.6 Electricity Utilities .......................................................... 283 14.4 Projects ................................................................................... 284 14.5 Government Actions............................................................... 284 14.5.1 Energy Transition ............................................................ 285 14.5.2 Eco Innovation ................................................................ 285 14.6 Regulations ............................................................................. 286 14.6.1 Right to Connect.............................................................. 286 14.6.2 Fit & Inform .................................................................... 287 14.6.3 Meter Changes................................................................. 287 14.6.4 Feed-In Tariff .................................................................. 288 14.6.5 Certification..................................................................... 288 14.7 Expectations ........................................................................... 289 15 Summary and Conclusions .............................................................. 291 15.1 Towards a Decentralized Energy Supply: Summary.............. 291 15.2 International Experience......................................................... 299 15.3 Conclusions ............................................................................ 304 16 References, Links, Authors and Abbreviations ............................. 311 16.1 References .............................................................................. 311 16.2 Internet Links.......................................................................... 329 16.3 The Authors ............................................................................ 333 16.4 Abbreviations ......................................................................... 340

Introduction

The electricity systems of many countries are currently undergoing a process of transformation. Market liberalization has induced major mergers and acquisitions in the electricity sector, but has also forced companies to seek out new business areas. Environmental regulations, like the Kyoto process and the European Emissions Trading Scheme, are exposing the sector to external pressure. New technologies – such as renewable energy, combined heat and power (CHP), or “clean coal” technologies – are emerging. Recent worldwide experiences with blackouts have once more put security of supply on the agenda. In Germany, the nuclear phase-out and decommissioning of outdated coal plants will lead to a need for replacement of more than one third of the current generation capacity by 2020. The need for replacement is an extremely important driving force for the current transformation, forcing conventional and new technologies to compete for a role in the future energy supply. The overall transformation of electricity systems is neither driven nor shaped by technical or societal modifications alone, but rather by a rich diversity of processes in the realms of technology, politics, society and economy. Achieving sustainable development in the energy sector entails specific qualities characterizing the changes which need to be undertaken. Climate change and limited fossil resources call for a reduction of non-renewable primary energy input and greenhouse gas (GHG) emissions by 50 to 80 % by 2050 (Enquête 2002). The resulting structural transformation will require innovation in many different realms, including the development of new technologies, new forms of corporate organization, new user routines, new institutional arrangements for governance, new conceptions regarding how problems should be understood, and new means of measuring electricity system performance. One possible developmental path is decentralization of the electricity system. Distributed power generation in small, decentralized units is expected to help in reducing emissions and saving grid capacity, while also providing opportunities for renewable energy. It could thus form a constituent part of a more sustainable future. Broad implementation of

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distributed generation, however, would imply thoroughgoing structural change as well as a surge in innovation. Recently, decentralization and developing means for autonomous or individual energy supply also appear to be en vogue. A trend towards smaller technical systems has, since the 1970s, been advocated by many writers as a return to life on a human scale. The economist and writer E. F. Schumacher, for instance, wrote that technological development should be given “a direction that shall lead it back to the real needs of man, and that also means: to the actual size of man. Man is small, and, therefore, small is beautiful. To go for giantism is to go for self-destruction” (Schumacher 1973). This vision of decentralized, and often autonomous, technological systems has been often replicated and has also been applied to energy systems. For instance, in its 2002 memorandum the Club of Rome demanded that, whenever possible, a decentralized energy supply should be established (Club of Rome 2002). Visionary thinkers like Jeremy Rifkin have stated that, in the new age of decentralized energy production, everybody could, in principle, generate and consume his own energy (Rifkin 2002). The present book focuses on one such element of distributed generation options which could play a role within the development of sustainable energy systems for the future, actually a micro-aspect within the overall transformations that are already going on and will be going on over the coming years. This is the combined production of electricity and heat in small units that are directly embedded in the buildings where the heat and electricity are to be used. This configuration is referred to as micro cogeneration. Compared to the currently dominant pattern which combines electricity production in central plants, supplying 100,000 buildings at once, with separate on-site heating systems, micro cogeneration would make a fundamental difference in electricity systems if it actually became widely implemented. It not only integrates technological as well as cultural and institutional components, but also entails the potential for reducing the ecological impacts of electricity production. However, as many chapters in this book will seek to illustrate, the current context for micro cogeneration in many countries is not a very bright one. Micro cogeneration thus offers a rewarding opportunity for studying the conditions facing radical innovations in potentially unfavorable regime contexts. At the same time, when market and economic factors become favorable, micro cogeneration may have the potential for reaching a considerable market size, thereby helping to advance other downstream or system innovations, such as the “virtual power plant” or new household energy-management systems, combined with altered consumer awareness.

Introduction

XIII

More recently, the interest in micro cogeneration has also been fuelled by an enthusiastic interest in fuel cells, which could, amongst other applications, also be used in individual buildings as CHP devices. But micro cogeneration goes beyond fuel cell technology and involves various other conversion technologies. This book aims at assessing the potential contribution of micro cogeneration towards a sustainable transformation of electricity systems. We examine the role it should or may play within a sustainable energy strategy, assess related implementation conditions and discuss possibilities to improve the context for introducing micro cogeneration on a larger scale. The issue demands a multifaceted answer that considers the various factors involved in real world applications of micro cogeneration. This book, therefore, combines the perspectives of engineering and life cycle studies, economics, sociology, applied psychology, and political science. Not only various academic disciplines, but also different national perspectives need to be taken into account, because the success chances of micro cogeneration largely depend on both the “hardware” and “software” of a country: on the one hand, the existing infrastructural context which micro cogeneration has to fit into (e.g., building stock, dominant fuels, district heating infrastructure) and, on the other hand, the political and economic framework, including support schemes, innovation policy, energy prices, and micro cogeneration legislation. Therefore, authors from several countries where significant micro cogeneration-related developments are now taking place were invited to contribute to this book. Structure of the book. The core of this book is based on research carried out within a project called “Transformation and Innovation in Power Systems” (www.tips-project.de), funded by the German Ministry for Education and Research (Bundesministerium für Bildung und Forschung, BMBF), under the auspices of the Socio-Ecological Research Framework (Sozial-ökologische Forschung), launched in 2001. Chap. 1 defines the book’s terrain: what is micro cogeneration? What are adequate conversion technologies? Which further technological components are required for establishing a functioning micro cogeneration system? Micro cogeneration is part of a larger transformation process. In Chap. 2, we investigate the relevance of this process for the future performance of micro cogeneration and, vice versa, the role different kinds of energy scenarios attribute to micro cogeneration. In Chap. 3, we discuss important parameters which determine market perspectives for micro cogeneration, and try to assess the potential for it in the German market under different conditions.

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How far this market potential is actually exploited depends primarily on the economic performance of micro cogeneration (Chap. 4). Here, we calculate its economic viability from different perspectives. Another prerequisite for successful market development is the environmental superiority of this innovation. Therefore, an environmental life cycle perspective on micro cogeneration is presented in Chap. 5. Because micro cogeneration can be considered to be one of the most extreme examples of decentralization, the consumer gains in importance. Under certain circumstances, the boundary between consumer and producer is even blurred or eliminated. In Chap. 6, the users, particularly early pioneers who are necessary for spreading information about and realizing the systems, are the object of detailed description. Not only the consumers, but also energy companies are major actors involved in developing, or retarding, micro cogeneration development. Chap. 7 looks at the setting of energy markets and entrepreneurial actors relevant to implementing micro cogeneration in Germany; it inquires about their interests, motivations, and strategies to foster, or to hold back, this innovative technology. The institutional framework of micro cogeneration in Germany involves not only directly CHP-related legislation, but also general energy legislation, innovation policy, and funding for research and development. Chap. 8 tries to precisely locate the field on which micro cogeneration has to prove itself. Successful development of micro cogeneration requires compatibility with existing and future energy systems. This concerns not only security of supply and availability of fuels, but also technical compatibility with electricity networks. This embedding of micro cogeneration is investigated in Chap. 9. Whereas the TIPS study funded by the German ministry focused on micro cogeneration from an analytic point of view, the experiences of a micro cogeneration practitioner are described in Chap. 10, dealing with the various types of micro cogeneration operators and the range of the unforeseen problems occurring in the everyday operation of micro cogeneration. Micro cogeneration is being developed, and in fact has been more successfully implemented, in other regions worldwide. We therefore invited micro cogeneration experts from the four most important micro cogeneration countries outside Germany – Great Britain, the Netherlands, Japan, and the United States of America – to report on micro cogeneration hard- and software, and the respective peculiarities in these countries (Chap. 11 to 14). Following our conclusions in Chap. 15, the reader is referred to a substantial body of literature and World Wide Web resources (Chap. 16).

Introduction

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The authors would like to thank the guest authors, namely, Sylvia Westermann, Michael Colijn, Jeremy Harrison, Yasushi Santo, and Jon Slowe, for their contributions. We also acknowledge valuable contributions from Raphael Sauter (FU Berlin); Katherina Grashof, Sabine Poetzsch, and Jens Gröger (Öko-Institut); Regina Schmidt and Bernd Franke (IFEU); as well as Lars Winkelmann (Berliner Energieagentur GmbH). The authors gratefully acknowledge the funding of the TIPS research project by the German Ministry for Education and Research. Martin Pehnt, Martin Cames, Corinna Fischer, Barbara Praetorius, Lambert Schneider, Katja Schumacher, Jan-Peter Voß Heidelberg, Berlin, July 2005 Supported by the German Ministry for Education and Research,

1 Micro Cogeneration Technology Martin Pehnt

1.1 Defining Micro Cogeneration The principle of cogeneration has long been known. As early as the first decade of the 20th century, a number of cogeneration units were already supplying heat and electricity to houses and companies. Cogeneration, or combined heat and power production (CHP), is “the process of producing both electricity and usable thermal energy (heat and/or cooling) at high efficiency and near the point of use” (WADE 2003). It thus incorporates three defining elements: 1) the simultaneous production of electricity and heat; 2) a performance criterion of high total efficiency; and 3) a locational criterion concerning the proximity of the energy conversion unit to a customer. While the discussion on micro cogeneration, or micro CHP, has only recently gained momentum, the technological roots of micro cogeneration go back to the early development of steam and Stirling engines in the 18th and 19th century, respectively. Today, several technologies exist that are capable of providing cogeneration services, such as reciprocating engines, gas turbines, Stirling engines, and fuel cells. But, in principle, the exhaust heat from any thermal power plant, such as gas combined-cycle power plants or coal power plants, can be used for cogeneration applications. Advances in the technology, as well as a general trend towards smaller unit sizes of power plants, have led to an increased interest in small CHP units, with the hope of ultimately developing units that can provide electricity and heat for individual buildings. This is what we call micro cogeneration which we define as the simultaneous generation of heat, or cooling, energy and power in an individual building, based on small energy conversion units below 15 kWel. Whereas the heat produced is used for space and water heating inside the building, electricity produced is used within the building or fed into the public grid.

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Martin Pehnt

Opposed to, for example, the EU cogeneration directive, according to which micro cogeneration is defined as “a cogeneration unit with a maximum capacity below 50 kWel” (EU 2004), we restrict the definition of micro cogeneration to systems below 15 kWel for the following reasons. Firstly, these systems are clearly systems for use in single-family dwellings, apartment houses, small business enterprises, hotels, etc., which can be distinguished from systems supplying heat to a district or neighborhood (i.e. district heating systems). Secondly, systems in this small power regime substantially differ from larger ones with respect to electricity distribution, ownership models, restructuring of supply relationships, and consumer behavior. Also, compared to conventional CHP, based on district heating, no additional heat distribution grid is required. Systems below 15 kWel can be directly connected to the threephase grid. Moreover, the barriers all CHP systems have to face are more pronounced in the case of such small systems. As shown in Sect. 2.2, taking an integrated perspective, the innovation of micro cogeneration combines a set of novelties in a number of dimensions. At first sight, though, micro cogeneration often appears as a purely technical innovation. The obvious aspect of novelty is the introduction of a new machine, with new functionalities and different connections to other technical components of the electricity and heat supply system. In this chapter, we will look at the different technical components of a micro cogeneration plant as well as the technologies available for micro cogeneration purposes. The technological core of micro cogeneration is an energy conversion unit that allows the simultaneous production of electricity and heat in very small units. In addition to this core, further technology components are Energy converter Energy converter

Energy converter

Communication technology

Data

Electricity Fuel supply

Fuel

Energy converter Heat

Grid access Energy management

Energy service to customer

Fig. 1.1. Technological components of a micro cogeneration system

1 Micro Cogeneration Technology

3

involved in a micro cogeneration system (Fig. 1.1), such as well-developed grid access, including possible metering and control devices. In the remainder of this chapter, the various technological components of such a system will be described in detail.

1.2 Conversion Technologies A conversion technology serves to convert chemical energy that is stored within a fuel into “useful” forms of energy, i.e. electricity and heat. A number of different conversion technologies have been developed which have domestic CHP applications (Fig. 1.2). The conversion process can be based on combustion and subsequent conversion of heat into mechanical energy, which then drives a generator for electricity production (e.g. reciprocating engines, Stirling engines, gas turbines, steam engines). Alternatively, it can be based on direct electrochemical conversion from chemical energy to electrical energy (i.e. fuel cell). Other processes include photovoltaic conversion of radiation (e.g. thermo photovoltaic devices) or thermoelectric systems. In principle, most conventional cogeneration systems can be downscaled for micro cogeneration applications. However, some of them have yet to be successfully implemented for very small applications. Micro gas turbines, for instances, have only been developed with capacities above 25 kWel and are thus not categorized as micro cogeneration technologies according to our definition. Otto engine

Steam engine

Stirling engine

Micro turbine

Fuel cell

Thermophotovoltaics

Fuel

Fuel

Fuel / heat source

Fuel

Fuel

Fuel

Combustion in piston

Combustion in burner

Combustion in burner

Combustion in turbine

(Reforming)

Combustion in burner

Mechanical energy

Electricity

Mechanical energy

Heat

Combustion

Electricity

Electrochemical conversion

Stirling process

Steam

Mechanical energy

Heat

Electricity

Conversion in semiconductor

Mechanical energy

Heat

Electricity

Heat Electricity

Heat

Electrochemical

Fig. 1.2. Cogeneration technologies and conversion steps

Electricity

Others

Heat

...

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Martin Pehnt

1.2.1 Reciprocating Engines

7000

35

6000

30

5000

25

4000

20

3000

15

2000

10

1000

5

0

Electrical efficiency (%)

Capital cost (Euro/kWel)

Reciprocating engines are based on conventional piston-driven internal combustion engines. For micro cogeneration applications, typically, spark ignition (Otto-cycle) engines are used, comparable to those used in automobiles. In an Otto engine, a fuel, for instance natural gas, is mixed with air and compressed in a cylinder. This mixture is than ignited by an externally supplied spark. The now hot, expanding gas moves a piston, thereby causing the crankshaft to rotate. The mechanical energy produced by this combustion is then used to drive a generator. The exhaust heat as well as the heat from the lubricating air cooler and the jacket water cooler of the engine are recovered using heat exchangers, and then supplied to the heating system. Reciprocating engines operate with less excess air compared to gas turbines. This leads to higher combustion temperatures, causing thermal NOx production, due to the oxidation of the nitrogen contained in the air. There are two possibilities to reduce the amount of NOx released. The engine can be operated in a lean mode, i. e. with excess air, so that reaction temperatures of the reaction are lowered. The second option is to operate the system almost stochiometrically (i. e. with an air/fuel ratio O =1) and to use a three-way catalyst. The electrical efficiency of reciprocating engines, defined as net electrical energy output divided by natural gas input, depends strongly on the electrical capacity of the system (Fig. 1.3). At sizes below 15 kWel, efficiency generally does not exceed 26 %. Thermal efficiency depends on the system and its level of heat integration (e.g., whether condensing heat

0

0

5

10

15

20

Power (kWel)

Fig. 1.3. Capital cost and electrical efficiency of reciprocating engines as a function of the size of the system (Source: ASUE 2001)

1 Micro Cogeneration Technology Supply Exhaust gas

Heating pump

5

Hot water

Micro CHP unit Return Exhaustgas heat exchanger

Gas

Muffler

Heat exchanger Storage

Engine

Pump Temperature regulator Cold water

Generator Power electronics

Public grid

Demand/household

Fig. 1.4. Principle components of a reciprocating engine system (adapted from Ecopower)

is used). Combined electrical and thermal efficiency (total efficiency) varies between 80 and well above 90 %. Similar to electrical efficiency, capital costs per kWel depend on the electrical capacity of the system. A significant decline of capital costs (scale effect) can be observed particularly as systems reach the 10 kWel range (see Chap. 4). Current Developments Reciprocating engines are commercially available and produced in large numbers by a variety of companies worldwide. The market leader is the Germany-based company Senertec. The Senertec model – called Dachs (“badger”) – generates 5.5 kWel and a thermal power of 14 kW (Fig. 1.5). It achieves 25 % seasonal electrical efficiency and thermal efficiencies above 80 % (depending on the building, over 90 % when using a condensor). As of fall 2004, Senertec had sold 10,000 of these models. Other companies providing micro cogeneration units include Power Plus (recently purchased by the boiler company Vaillant), with its 4.7 kWel Ecopower module, capable of modulating its capacity, and the US-based Vector CoGen (5 and 15 kWel), using a Kawasaki combustion engine. The latter is currently optimized for series production. According to the product specifications, Vector CoGen units achieve electrical efficiencies of around 28 to 34 % and total efficiencies between 70 and 79 %. In Japan, the companies YANMAR, Sanyo and AISIN also develop reciprocating engine based power stations.

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Martin Pehnt

Fig. 1.5. Senertec Dachs (left) and PowerPlus Ecopower (right): examples of reciprocating engine micro cogeneration for apartment houses and small commercial enterprises (Sources: Senertec and Ecopower)

An interesting development for single-family house applications is Honda’s small 1 kWel system named Ecowill (Fig. 1.6), which was developed jointly with Osaka Gas and other companies. Honda’s cogeneration unit combines the GE160V – the world’s smallest natural gas engine – with a lightweight generation system. The system is based on a O = 1 Otto engine, with a three-way catalyst and oxygen feedback control to reduce the quantity of NOx emissions. Osaka Gas distributes this system and has already sold more than 10,000 units in 2004 (see Chap. 13).

Fig. 1.6. Honda Ecowill micro cogeneration engine (Source: ASUE)

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1.2.2 Stirling Engines Unlike spark-ignition engines, for which combustion takes place inside the engine, Stirling engines generate heat externally, in a separate combustion chamber. In the Stirling engine, developed in 1816 by Robert Stirling, a working gas (for instance helium or nitrogen) is, by means of a displacer piston, moved between a chamber with high temperature and a cooling chamber with very low temperature. On the way from the hot to the cold chamber, the gas moves through a regenerator, consisting of wire, ceramic mesh or porous metal, which captures the heat of the hot gas and returns it to the gas as the cold gas moves back to the hot chamber. Stirling engines can be designed in different configurations, distinguished by the position and number of pistons and cylinders and by the drive methods (cinematic and free-piston) (Educogen 2001). The mechanical energy of the Stirling engine is used to drive a generator. Due to the fact that fuel combustion is carried out in a separate burner, Stirling engines offer high fuel flexibility, in particular with respect to biofuels, and, because of the continuous combustion, lower emissions. In principle, other heat sources, such as concentrated solar irradiation, can be used. Companies such as Solo and Sunmachine have developed parabolic mirrors for that purpose. Stirling engines have the potential to reach high total (electrical plus thermal) efficiencies. Their electrical efficiencies, however, are only moderate. So far, 20 % seasonal average efficiency has been achieved in larger systems, with a predicted > 24 % for future models. Small Stirling engines are designed for low cost; consequently, they achieve lower electrical efficiencies than larger units, typically around 10 to 12 %. Current Developments Stirling engines are in between the pilot and demonstration phases and marketing. There are still field trials being carried out; but initial commercial products are already defined and on the verge of series production. The New Zealand-based company WhisperTech is developing a Stirling engine called WhisperGen, with a capacity of up to 1.2 kWel and 8 kW of heat (Fig. 1.7). In the WhisperGen, four sets of piston cylinders are put in an axial arrangement. The British utility Powergen, part of Germany’s E.ON, has ordered 80,000 WhisperGen power stations, due to be delivered by mid 2005. A prerequisite for this is the establishment of series production facilities. As Stirling engines require very precisely produced components, the scale-up from small-scale to series production presents a considerable challenge.

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Fig. 1.7. Example of small (| 1 kWel) Stirling engine micro cogeneration: WhispherTech

MicroGen markets a linear free-piston Stirling engine with 1.1 kWel. MicroGen anticipates that, by 2007, series production will be launched. EnAtEc micro-cogen B.V., from the Netherlands, is in the stage of fieldtesting its 1 kWel unit, with an electrical efficiency of 10 %. The Swiss company powerbloc GmbH is focusing its efforts on a 1.1 kWel Stirling engine. With respect to systems above 1 kW electrical capacity, the German companies Solo, Mayer&Cie. and Sunmachine have been developing Stirling machines. The Solo engine has sold 30 units up until the middle of 2004 (Fig. 1.8). Solo and Sunmachine are also experimenting with wood pellet burners and solar concentrators.

Fig. 1.8. Examples of larger (t 3 kWel) Stirling engine micro cogeneration: Sunmachine (left) and Solo (right)

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1.2.3 Fuel Cells A fuel cell converts the chemical energy of a fuel and oxygen continuously into electrical energy. Typically, the fuel is hydrogen. The energy incorporated in the reaction of hydrogen and oxygen to water will be partially transformed into electrical energy (Pehnt 2002). The “secret” of fuel cells is the electrolyte, which separates the two reactants, H2 and O2, in order to avoid an uncontrolled, explosive reaction. Basically, the fuel cell consists of a sandwich of layers that are placed around a central electrolyte: an anode at which the fuel is oxidized; a cathode, at which the oxygen is reduced; and bipolar plates, which feed the gases, collect the electrons, and conduct the reaction heat (Fig. 1.9). To achieve higher capacities, a number of single fuel cells can be connected in series. This is called a fuel cell stack.

Electrons

H

O

2

2

H2 O2

Protons H2 H 2O

Anode

Cathode Membrane Reaction layer Gas diffusion layer Bipolar plate

H O, O 2

2

Fig. 1.9. Basic construction of a fuel cell-example Polymer Electrolyte Fuel Cell

Fuel cell micro cogeneration units are either based on Polymer Electrolyte Fuel Cells (PEFC; also Proton Exchange Membrane Fuel Cell, PEMFC), using a thin membrane as an electrolyte and operating at about 80° C, or Solid Oxide Fuel Cells (SOFC), which are high-temperature fuel cells working at 800° C. Recent efforts have been working toward the development of high-temperature molten carbonate fuel cells for this lowpower segment. Typically, natural gas is the available fuel for micro cogeneration applications. It mainly consists of the hydrogen-containing methane (CH4), which is converted into hydrogen in a so-called reforming reaction. This takes place either in a separate device, the reformer, or, as in the case of high-temperature fuel cells, inside the stack (internal reforming).

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Taking natural gas as the dominant fuel for fuel cells: In the short- and medium-term perspective, low temperature fuel cells (Proton Exchange Membrane Fuel Cells, PEMFC) in the low-power range may reach seasonal electrical efficiencies on the order of 28 to 33 %; in the long-term it is possible to achieve up to 36 % for domestic systems. However, it is so far unclear whether fuel cell systems can achieve the same thermal efficiencies as promised by the competing technologies. This is due to the fact that the heat cannot be extracted at well-defined points in the system, but rather at many dispersed heat sources, leading to greater measures being required for insulation and heat exchange.

Current Developments In the last decade, considerable efforts have been made to further develop this technology, particularly in terms of mobile applications. However, fuel cells are not yet commercially available for micro cogeneration applications. Here, both R&D activities and initial field trials are being carried out. Some companies recently had to announce that further R&D is required before their systems can become commercially attractive, with acceptable longevity, technical performance, and system cost.

Fig. 1.10. Examples of fuel cell micro cogeneration: Sulzer Hexis (left), Vaillant (right) (Sources: Sulzer Hexis, EWE AG)

Among the most advanced companies in this sector are Sulzer Hexis, marketing a 1 kWel SOFC system with electrical efficiencies between 25 and 30 %, which is currently being field-tested with more than 100 test units and further developed for series production, and Vaillant, which integrates a Plug Power PEMFC stack into a heating system with

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capacities of 4.6 kWel and 7 kWth. The latter system is currently being field-tested. IdaTech, together with RWE Fuel Cells and Buderus, is developing a 4.7 kWel PEMFC system, and European Fuel Cell GmbH is planning the field-testing of a 1.5 kWel PEMFC system. The target electrical efficiency of these systems is above 30 %; some fuel cell manufacturers even anticipate 35 %. As seasonal efficiencies, 32 % seems more likely for micro cogeneration systems. From 2004, the time perspective until readiness for marketing is about 8 to 10 years. It is interesting to see that most fuel cell developers have been cooperating with major boiler manufacturers to ensure a broad market in the heating sector (see Chap. 7). 1.2.4 Other Technologies A number of other technologies for micro cogeneration energy conversion are currently under development. Among the more advanced concepts, machines based on Rankine steam cycles are being developed. The Rankine cycle is the ideal prototype for steam engines in use today. Various companies, such as the Australian Cogen Micro with a 2.5 kWel system, Energetix’ Inergen system with a 1 kWel generator, Climate Energy LCC, or the Baxi Group are pursuing this path, using different types of expanders for the steam, such as free-piston engines, scroll expanders, or reciprocating engines, and different types of working fluids, such as steam, organic substances, or two-phase mixtures of steam and water. However, none of these products is commercially available yet. One advanced example of a Rankine type engine is the SteamCell, developed by the German company Enginion. In the SteamCell, feed water is compressed, heated with a compact burner, and transformed into steam, which then drives an innovative piston engine (Fig. 1.11). Following the expansion, the steam condenses and flows back into the tank. The SteamCell has a rated electrical power of 4.6 kWel and a target electrical efficiency of 17 %. Field tests are planned for 2005, with forecasted market introduction by 2006.

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Fig. 1.11. Principles of the steam expansion engine (Source: Enginion)

Due to the continuous combustion in the burner, the hydrocarbon and carbon monoxide emissions remain very low, whereas nitrogen oxide emissions are determined by the maximum combustion temperature, which is carefully controlled in the system. The external heat supply also offers the possibility of using a variety of fuels. A similar steam cogeneration system is currently being field-tested by the Germany-based company OTAG. In this system, called “Lion” (3 kWel), steam is produced, injected into a piston from alternating sides, and expanded. The moving linear piston then produces electricity. Generally, the electrical efficiencies of all Rankine cycle machines are low, on the order of 12 to a maximum of 20 %.

Fig. 1.12. Examples of steam cycle based micro cogeneration systems: Enginion SteamCell (left) and OTAG Lion (right)

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There are other technologies, which are not based on electrochemical processes (fuel cell) or combustion engines (reciprocating, Stirling, or steam engine), but rather on semiconductors that convert the waste radiant energy of a heat source directly into electricity by means of a modified photovoltaic cell. This technology, called Thermophotovoltaics (TPV), applies low band-gap photovoltaic materials. The system consists of a burner and a ceramic emitter (optionally with a filter), which is heated by the burner and emits light, which is then turned into electricity using a photovoltaic cell. Several developments are required before TPV systems can be successfully introduced into the market. Particularly, the emitter material must be optimized to match the wavelength range to the cells. Several rare earth materials are currently being investigated for that purpose. Also, solar cell design and fabrication, as well as system engineering, are required to optimize performance. Several research institutions, such as the Colorado based National Renewable Energy Laboratory (NREL), and companies, such as Sarnoff Corporation and Edtek, are developing TPV systems. Thermoelectric devices also directly convert electromagnetic radiation into electricity. However, they do not apply photovoltaic materials, but instead make use of the fact that pairs of dissimilar conductors, e.g. differently doped semiconductor materials such as Bismuth Telluride, produce a current when there is a temperature gradient between them. California based Hi-Z Technology, Inc. developed a 1 kWel thermoelectric generator to generate electricity from the waste heat of engines (e.g. Diesel) as a substitute for the truck engine alternator. In principle, thermoelectric technology can also be employed for micro cogeneration purposes. However, both thermophotovoltaic and thermoelectric devices are not expected to enter the micro cogeneration market in the short or medium term.

1.3 Grid Integration, Communication Technology, and Virtual Power Plants For operation in the context of a larger system, for instance as a “virtual power plant”, effective devices are required for communication between micro cogeneration units and system operator. These devices should support the optimal operation of the cogeneration system by effectively matching the operation of the individual systems with the demands of the user and of the grid operator.

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Networking of several micro cogeneration devices is possible on several levels: x Microgrids that physically connect the micro cogeneration units to several customers without further transferring information between the units, thus forming a more or less independent grid, x information technologies connecting the micro cogeneration units to a data server, and x “virtual power plants”, which combine the information technologies with a central management system. Communication interfaces are currently being developed by several manufacturers, allowing additional features such as web-based control of the power plant, as well as alarm devices, automated data collection and alerts to maintenance companies in case of failures, etc. With respect to households, similar communication devices could be developed to form energy management systems for a household. Such home load management could actively influence loads, depending on external signals (for instance time-dependent electricity rates), defer and prioritize loads, and, ultimately, act as a “home energy broker”, automatically selling to or buying electricity from other customers. Taking this a step further, the micro cogeneration unit could be externally controlled by a central operator to exploit additional benefits and services. In several projects, such as in the Vaillant field test program, suitable communication pathways for such communication strategies are being investigated. For instance, an easy and cheap method of communication could be unidirectional ripple control technologies, which allow the utility to turn the power plant on or off in periods of peak or low demand. Data management through the internet, Powerline technology, SMS or other forms of bi-directional data flows would be even more advanced. The concept of communicative networking ultimately leads to the virtual power plant. A virtual power plant consists of a number of geographically distributed power generation units – generally decentralized and low electrical capacity – which are integrated into one larger operational unit by means of a joint control and operator interface (Feldmann 2002; Jänig 2002; Stephanblome and Bühner 2002; Arndt and Wagner 2003). The term “virtual” does not refer to the energy flows, but rather to the plant itself, which is not at one location, but is rather dispersed among a number of generators. Micro cogeneration units can be elements of such a virtual power plant. Often, larger CHP units and renewable electricity generating systems, such

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as wind power and photovoltaics, are mentioned in the context of virtual power plants. Generally, the coordinated connection of individual power plants allows for the balancing of fluctuating rates of generation caused by renewable energy systems (wind, solar irradiation) or by fluctuating demand (CHP systems). Virtual power plants rely on advances in several technological areas to successfully meet customer demand, technical and safety standards, cost pressures, and environmental performance. Particularly, information and communication technologies and a management system are required for successful integration of the respective energy systems. The management system often includes a forecasting tool to anticipate future generation and demand and to better integrate the individual systems. Communication links to external service providers, such as weather forecasts, electricity stock exchanges, and so forth are required if more sophisticated forecasting and optimization are to be realized. Also, optimization and simulation tools may form part of the management system of a virtual power plant. Possible communication pathways include telephone communication, particularly ISDN and DSL, internet, ripple control, UMTS, and Powerline technology (where electricity lines are used as a communication medium). Low communication costs are often regarded as crucial for the economic viability of virtual power plants (Lewald 2001; Arndt and Wagner 2003). Lewald calculates that, for certain concepts, 10 % of the monthly total cost would be for communication, which does not mirror the additional benefits of virtual power plants. From an energy-economic point of view, virtual power plants could offer various ways of reducing costs and increasing revenues (Roon 2003): x Cost reduction: On the hand, there are effects related to “clustered interests”, for instance, buying a number of CHP units or service contracts could lead to volume discounts, as well as discounts for the fuel needed. Also, lower interest rates could be offered to larger operators than to individual power plant operators. On the other hand, the integration of several systems into one operational unit could lead to lower O&M costs, due to automatic early-warning systems, or to minimized fuel use (and thus, lower fuel costs), due to optimized operational strategies (e.g. optimized operating points, merit order). x Increase of revenues: CHP products, particularly electricity, can be marketed differently when many systems are pooled, because the specific transaction costs can be lowered and certain regulatory requirements can be fulfilled (e.g., in order to participate in the control

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power market, a minimum capacity is required). These options include selling the electricity on spot or regulating energy markets. With these positive economic aspects of virtual power plants in mind, one should note that the amount of power that can be devoted to commercialization is usually only marginal because, in many cases, the producer’s own consumption of the electricity generated is more lucrative than feeding it into the grid, even considering new marketing possibilities. In addition, power generation is combined with heat generation, which has to be used locally. Furthermore, considerable institutional barriers impair the realization of alternative ways of commercialization. Other than with virtual power plants based on larger individual generation units, under present-day conditions, the potentially higher proceeds of connected micro cogeneration plants do not justify the high expense for installation and management of a virtual power plant (Roon 2003).

1.4 Conclusions In Table 1.1, different conversion technologies are compared on the basis of selected criteria. In addition, Fig. 1.13 depicts the status of market development of the various technologies. Table 1.1. Characteristics of micro cogeneration technologies Noise level

Pollutant emissions

Conversion technology

Kel

Kth

Reciprocating engine

20-25

> 85

Stirling engine

10-24

> 85

Low

Very low to medium b)

Fuel cell

28-35

80-85

Low

Zero (H2) to almost zero (hydrocarbons)

Steam expansion engine

n. a.

n. a.

Low

not yet measured, principally similar to Stirling

Medium Rather high, depending on catalyst/engine technology and maintenance

a)

K: efficiency, el electric, th thermal. b) depending on the burner type

a)

Fuel flexibilit y

Market availability

Medium Commercially available

High

Near to market

Medium

Pilot plants, R&D

High

R&D

Economic viability Given for certain applications Cost reduction necessary High cost reduction necessary High cost reduction necessary

depending on the Stirling concept

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Whereas reciprocating engines are commercially available, produced in large numbers and achieving high electrical and total efficiencies, they suffer from higher exhaust emissions compared to the competing micro cogeneration systems (see Sect. 5.1.2). Because fuel combustion is carried out in a separate burner, Stirling engines offer lower emissions as well as high fuel flexibility, allowing, in particular, for the use of bio-fuels and solar irradiation. Stirling engines have the potential to achieve high total efficiency, though with only moderate electrical efficiency. Smaller Stirling engines have an even lower electrical efficiency and are primarily designed to be low cost. Fuel cells are still in the R & D phase, with a number of pilot plants currently being tested. They offer the potential benefit of the highest electrical efficiency and almost zero local emissions. Additionally, the high ratio of electrical to thermal efficiency (power to heat ratio) might increase the CHP electricity generation potential, because with given (and limiting) heat demand, more electricity can be produced (see Chap. 4). In the last decade, considerable efforts have been made to further develop this technology. However, it remains unclear whether fuel cell systems can ever achieve a total efficiency equaling those promised by competing technologies. Also, the high capital cost of early product generations remains a major challenge. Research and development • Development of a new idea • Lab-scale development

Demonstration • Scale-up to commercial size • Prototypes, field tests

Commercialisation

Market diffusion

First introduction into commercial market (e. g. in niches)

Technology mature

Reciprocating engine

Stirling engine Fuel cell

Steam expansion engine Further technologies e. g. Thermophotovoltaics

10 years or more

Time to market introduction 5 years

1 year

0 years

Fig. 1.13. Status of market development of micro cogeneration technologies

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Steam expansion machines are still in the R&D phase. Potentially, they offer low emissions and high fuel flexibility, due to their external burner. In addition, some steam engine concepts envision a flexible flow of steam, allowing electricity and heat ratios from approximately 0.3 to pure heat supply. However, the technical demonstration of feasible CHP systems is still awaited and electrical efficiencies are expected to be low. Other technologies, such as thermophotovoltaic and thermoelectric systems, are still in the research stage.

2 Dynamics of Socio-Technical Change: Micro Cogeneration in Energy System Transformation Scenarios Jan-Peter Voß, Corinna Fischer

2.1 Introduction Energy is in flux. There is much talk nowadays about restructuring of markets, reorientation of business strategies, emergence of new technologies, reform of regulatory institutions, reinvention of the customer, or reconfiguration of the socio-technical architecture of energy production and consumption. Fundamental changes are said to be going on or are expected in the near future (Patterson 1999; Eising 2000; CSTM 2001; Smil 2003). This transformation of energy comprises electricity, natural gas, and the heating of buildings alike.1 The current transformation is closely related to the liberalization of formerly monopolized markets. These changes in the regulatory framework triggered further changes which go well beyond the stronger cost orientation and improved customer services that were the initial goals of the reform. The liberalization of electricity markets actually works towards a successive restructuring of the whole sector in its technical, organizational, and even cultural dimensions. The new market environment alters strategic requirements for businesses in dealing with risk and uncertainty entailing the adaptation of corporate organization and 1

This has not always been the case. A couple of years ago, energy systems were mainly referred to with respect to their inertia and resistance towards change – be it for more economic efficiency or ecological soundness. Together with other public utilities such as water, railroads or telecommunications, electricity and natural gas even formed the subject of a special strand of research on ‘Large Technical Systems’, which aims to investigate the special role of these systems in public life and political governance (Hughes 1983; Mayntz and Hughes 1988; Coutard 1999; La Porte 1991; Summerton 1992).

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technological portfolios. In fluid European markets, the strategic capabilities of companies (including size) become crucial for success. Short lead times and pay back periods, as well as flexible application of technologies, gain in importance. This process links up with specific circumstances in local contexts. In Germany, for example, the changes through liberalization are combined with the politically decided upon phase-out of nuclear energy and the investment cycles of the coal-based generation infrastructure, creating a time window of a few years around 2015 in which one third of total electricity generation capacity needs to be substituted for by new plants. In this respect, there is indeed a fundamental transformation going on in electricity systems. But there is also another dimension to the talk about transformation which is more programmatic than factual: the question of sustainable development. For energy systems, sustainability requirements are effectively represented by the need to achieve substantial reductions in the emission of greenhouse gases – up to 80% lower emissions in 2050 than in 1990. The already long-running discussion about ecological restructuring of energy systems is now linking up with the ongoing changes outlined above. The current situation of flux thus represents a window of opportunity which may be used to introduce more sustainable structures and means of energy provision. It is argued that now while the system is ‘heated up’, its future course of development is moldable, whereas in a few years’ time, when new social and technical structures have emerged and become stabilized, the window will be closed again. Against this background concerns are being raised, particularly from the perspective of sustainable development, about new path dependencies which could result from current decisions and practices. The emerging structures of tomorrow are being shaped in the political, technical, and economic processes of today. They therefore require special attention with respect to the systemic interactions that they set off and the long-term consequences resulting from them. The current phase of restructuration may lead to an ensuing phase of decades-long stability. If such a lock-in happens it should not be one on the wrong path. It is for this reason that prospective sustainability assessment of various innovations – in technology as well as institutions and cultural practices – and the system alternatives to which they are connected gains in importance. This book focuses on a small aspect of this overwhelmingly complex problem set. It concentrates on micro cogeneration, which, compared to our conventional means of electricity and heat generation and supply, could make a fundamental difference if it actually becomes widely implemented. It has the potential to be pushed by and fed into a process of

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radical decentralization and, thus, become an architectural innovation which can turn the structure of energy systems upside-down. Former endpoints of electricity flows through a system could become sites of power generation, consumers could become producers, transmission networks could shift function from transport to regulation, distribution networks could be upgraded by information and control technologies to connect various local generation and load-management facilities into virtual power plants. Added to the restructuring effect for electricity systems is the further consequence that micro cogeneration would primarily be based on gas instead of oil, which today is the dominant energy source for residential heating, and coal, which is today dominant for power generation. This implies a substantially increased role for gas supply and networks for electricity and heating. Such effects make micro cogeneration a potentially path-breaking technological innovation, if it can link up with complementary changes in institutional and cultural contexts, such as market structures, network regulation, and user practices. Some of the effects and requirements of developments along such a path are explored throughout the book. In this chapter, we will not go into the details of the factors that constitute a working micro cogeneration configuration. These obviously include more than a smoothly running motor. Users would need to become acquainted with running a domestic power plant business, installers be prepared to take care of integrated electricity and heating systems, electricity and gas networks be reconfigured to take up changing load patterns, political regulation would need to adapt to a far more dispersed market structure in the sector. Many of these aspects will be taken up in the following chapters, while being investigated as drivers or impacts – or sometimes both – that will play a part in the evolution of new micropatterns in energy provision and use. Here, we set out to explore the lay of the land in which micro cogeneration, as one innovation among many parallel efforts, finds itself, sketching out factors that may change this landscape over the coming decades. We will also tentatively explore how micro cogeneration itself, and possibly in interaction with other social and technical innovations, may play a role in reshaping the terrain. This is quite an ambitious task. It deals with transformations on a very aggregate level, shaped by many underlying processes which are essentially unpredictable themselves and, yet, interact with each other in even more unpredictable ways. Moreover, we talk about long-term changes with a horizon of more than 20, and up to 50, years. Such an investigation, the analysis of future transformations in energy systems, cannot be done in any ‘exact’ manner. However, there have been and still are attempts at doing so: forecasting energy futures with the intention of

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predicting the likely mix of energy sources, employed technology, consumption levels, and other features of a system for tens of years ahead. They have not been very successful. And they will be so even less now, when stable framework conditions can no longer be assumed. In this chapter, we will therefore approach the exploration of macroscale dynamics in energy systems in different ways. The first is a discussion of transformation dynamics in a rather conceptual manner (Sect. 2.2). The intention is to create an understanding of the breadth and complexity of the energy transformation now taking place and draw attention to specific aspects which could be critical with respect to micro cogeneration development. For this, we draw on concepts and theories that have been derived from historical studies of socio-technical change in energy systems and other infrastructure sectors. This will allow us to develop a general understanding of the diversity of elements and processes on different levels which are coming together in what we conceive of as the parameters of the energy transformation. The second approach we take in our exploration is to make use of the rich offering of scenarios, visions, and expectations about energy futures which are formulated by diverse actors from the sector itself (Sect. 2.3). Even though none of these future visions can be taken as a precise prediction of what is going to happen, a review of possible futures which are currently being discussed may serve to peg out the likely bandwidth of changes which may be linked to the ongoing energy transformation. And since the expectations embodied in these visions and scenarios orient actual investment decisions, political strategies, and use practices they may indeed be more or less translated into reality. In concluding this chapter, we aim at pointing out some critical linkages between the general energy transformation dynamics and the possible path(s) of development of micro cogeneration (Sect. 2.4). This shall be the fruit to be harvested from the conceptual and bird’s eye perspective which this chapter adopts. It shall provide a starting point and background foil for the more focused and detailed analyses of micro cogeneration innovation in the following chapters.

2.2 Driving and Embedded: Micro Cogeneration and the Dynamics of Socio-Technical Change Studies of socio-technical change deal with the conditions of long-term change in large technical systems like electricity provision (Kemp 1994; Mayntz and Hughes 1988). Empirical studies of innovation processes

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show the close entanglement of social, technical, and ecological conditions and their manifold interactions in bringing about change and shaping production and consumption patterns (Bijker et al. 1987; Weyer et al. 1997). These studies have come up with a multi-level, multi-actor, multidomain concept of socio-technical change which portrays the complex interactions that are involved in the development of novel forms of technology, and their embedding in and shaping of existing system structures (Geels 2002b; Rip and Kemp 1998). Applied to micro cogeneration, this means conceptualizing the innovation in a more comprehensive way than simply referring to a group of technical artifacts, i.e. reciprocating engines, Stirling engines, or fuel cells set up for smallscale heat and power generation. Instead, the perspective is shifted towards understanding the interplay of these material components with other components, such as the knowledge needed to design and operate them, user practices which fit technical functions, interests of market actors to produce them, maintenance networks to provide operational services, complementary technologies, regulatory provisions, and the like. It is the combination of such heterogeneous components that create a sociotechnical “configuration that works” (Rip and Kemp 1998, p. 330). If any single component which is critical for the technology to work in practice is lacking or misadapted, the configuration is spoiled, i. e. innovation does not occur. This perspective raises awareness about system design activities, strategic re-combinations, and alignments in the process of innovation which go far beyond the dimension of nuts and bolts. They involve the forming of innovation alliances and playing out market rivals, negotiations between producers and financers, testing of user acceptability, lobbying for favorable regulations, creating public expectations and images, and so on. Accordingly, the socio-technical configuration that finally comes into being is strongly shaped by factors such as the image attached to the artifacts by users, the interests and power of market players, institutional path dependencies, and public opinion. This may play a stronger role than technical functionality understood in a narrow sense. For micro cogeneration this means that the technical artifact which may finally become established can be quite different (in design, size, performance) depending on, for example, whether it is provided by electric utilities or heating system suppliers; whether maintenance is taken care of by users, local installers, or the suppliers themselves; whether it gains political support for ecological reasons or security of supply. Another important aspect of recent conceptualizations of the dynamics of socio-technical change is a focus on the interaction of particular innovations with broader-context structures and ongoing changes within

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them. This multi-level perspective is inspired by evolutionary theory, which understands the emergence and change of complex systems as local variations which have to prove their fitness in the context of specific selection environments (Nelson and Winter 1982; Dosi 1988; Schneider and Werle 1998; Nelson 2000). If they survive, they become part of the selection environment for successive variations. This view is especially important for radical innovations, such as micro cogeneration, which face a selection environment that is geared towards central generation and longdistance transmission of electricity combined with separate heat production. The existing “regime” of energy provision (Kemp 1994; Rip 1995) may indeed represent a fundamental barrier for the widespread application of micro cogeneration technology, because it more or less subtly works towards the preservation of the existing structure: to which vested interests, actor networks, traditions, established mind sets, sunk costs, and more are attached. This resistance to micro cogeneration may take the form of adverse network regulations that do not grant indiscriminate conditions of access, technical standards which do not take account of the specificities of local generation, concerns raised about security of supply or the buying out of competitors on the market. Studies of socio-technical change, however, also state conditions under which radical innovations can prevail (Geels 2001; Geels 2002a; Berkhout et al. 2003): x When they make use of niches within existing regimes to gain technological maturity and develop a network of actors and social institutions which supports them, x when complementary innovations can link up with each other and become more independent from services provided within the regime, x and, this is most important, when they can exploit pressures, interstiches, and ongoing changes on the regime level as windows of opportunity for widening their niche, broadening support networks, or promoting favorable standards and regulations. Thus, even though existing structures of electricity provision in all their facets play an important role in shaping micro cogeneration innovations, they do not determine them. This is even less the case because they themselves undergo change, quite fundamentally and rapidly during recent years, and because this change is partly influenced by the dynamics of innovations themselves. Against this conceptual background, it appears that the dynamics of micro cogeneration development does not have a single source or direction. It can better be understood as an evolutionary process from which a new socio-technical configuration emerges. This process is

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embedded in the structures of the existing energy regime. Taking into account that this ‘selection environment’ itself is undergoing evolutionary change, one can speak of co-evolution to grasp the interaction of heterogeneous processes of innovation (Norgaard 1994; Rip 2002). In the current transformation of the energy system, co-evolutionary dynamics are becoming visible as the introduction of competition-oriented regulation shifts the criteria for fitness of technological innovation from aptness to central-system control towards flexibility with respect to volatile market conditions. Market-based regulation, on the other hand, could become successful, because development in gas turbine technology, distributed generation, renewable generation technologies, and so on have opened possibilities for competition in electricity generation markets. Another instance of co-evolutionary dynamics apparently is the difficulty for independent network regulation to be installed against the resistance of the highly organized interests of the electricity industry in Germany. Liberalization was made politically feasible only by letting industry negotiate conditions for network access on its own (Voß 2000). As soon as regional monopolies were opened to competition, however, the associational structures that supported the alliance of the electricity industry fell victim to internal quarrels, giving way to an incremental strengthening of network regulation – up to the establishment of an independent regulatory body eight years after liberalization. Against the background of co-evolutionary dynamics and multi-level interactions, the relation of innovation dynamics in micro cogeneration and broader transformation processes in the electricity system cannot simply be reduced to a constellation in which one is mechanically influencing the other. Micro cogeneration innovation could be an important driver of regime change. As such, it needs to be assessed with respect to the sustainability of the broader changes it might help to bring about. This includes decentralization, reduced role of the transmission networks, changing actor constellations, and fuel-switch towards natural gas. Micro cogeneration could also be strongly influenced and shaped by broader developments on the regime level. For this reason, if one aims at assessing the actual potential of micro cogeneration to contribute towards sustainable development, it is necessary to investigate the factors which determine the fitness of micro cogeneration technology under a range of possible alternative paths of regime transformation. This concerns their strategic value to certain actors, their economic and environmental impacts, requirements with respect to institutional and technological infrastructures and how these all play out in different scenarios of transformation. In the chapters of this volume, both of these perspectives – micro cogeneration as a driver of transformation, as well as micro cogeneration as being

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embedded in transformation – are discussed for important dimensions of the relationship between innovation and transformation in energy systems. To make the complexities of the dynamics of socio-technical change practically manageable for an integrated assessment of micro cogeneration, we propose to conceptualise it as an embedded innovation cluster (Fig. 2.1). The cluster comprises various interdependent innovation processes, social as well as technical. Giving credit to conventional talk about technology we can thus take the technical artefact, i. e., the energy conversion unit, as the focal innovation which is at the core of the cluster. Other technological, institutional, or cultural innovations whose development is linked to the focal innovation can in a first step be divided into three types, according to the dominant kind of relational influence they have with respect to the focal innovation (Fig. 2.1 for a schematic sketch of the micro cogeneration innovation cluster): x Promoting innovations which provide favourable conditions for the focal innovation to prosper (e.g., Third Party Financing schemes, maintenance and service networks, remuneration of avoided transmission costs by network regulation, heat storage technologies), x induced innovations for which the micro cogeneration technology is a prerequisite or driver (e. g., virtual power plants, integrated facilitymanagement services, adaptive networks), and x competing innovations which belong to alternative socio-technical configurations, and can thus impede micro cogeneration development or become inhibited themselves by it, depending on which innovation leads the race in occupying application potential or resources (e.g., district heating, thermal solar collectors, long-distance import of solar electricity). From this brief excursion into the foundational aspects of conceptualizing technology and innovation, we can derive an understanding of how micro cogeneration as a new and emerging technology is embedded in broader processes of transformation. One lesson is that the relation between innovations in micro cogeneration and transformations in energy systems is not a unidirectional but rather a recursive one. This makes feedback likely to occur and creates the possibility for positive or negative feedback dynamics, for example, the mutual reinforcement of decentralization and micro cogeneration development or the curbing of micro cogeneration development by limited niches for distributed generation (“increasing returns”, see Arthur 1997; Pierson 2000).

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Fig. 2.1. Micro cogeneration innovation cluster

The actual manner in which they will both interact is therefore very difficult to predict. The complexity of this relationship is further demonstrated by a closer look at how micro cogeneration is interwoven with its social and technical context, and the innovation processes and changes taking place therein. In the following section, we will look at different visions of possible future contexts and discuss their implications for micro cogeneration.

2.3 Pluralism of Prophecies: Scenarios of Transformation in Electricity Systems Transformation on the basis of co-evolutionary dynamics is not predictable. Nevertheless, expectations about the future are always there, and they shape ongoing change. These expectations also guide thinking about particular innovations, such as micro cogeneration, and they orient actual investment decisions and technological design activities. In order not to let these expectations implicitly crawl into the investigations and assessments which are undertaken in this book – and the evaluations of these by the reader – we try to make as transparent as possible the spectrum of future expectations with respect to the role of micro cogeneration in the transformation of energy systems. We do this by

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offering a review of selected future-oriented studies which differ remarkably with respect to objectives, methods, scope – and results. The variation of expectations reveals the great uncertainties which are connected to projecting technological and institutional changes in complex systems like energy provision and use. Scenarios, projections, and trend studies are all made by actors who have particular stakes in the future of energy. Their normative and strategic visions inevitably creep in when they assess the plausibility of the indefinite number of future developments which are possible (Grin and Grunwald 2000). We have to acknowledge that each of the images of the future and the pathways that lead there are constructed on the grounds of present-day thinking, which is itself embedded in present-day institutions, actor constellations and so on – even if some who make predictions about the future claim special visionary capabilities, which they refer to a special model or simply to expert authority. However, even though none of the scenarios and diagnoses about the future of energy can be taken as an inevitably correct prediction, they can still tell us a lot about reality. They tell us what people who have a stake in the energy transformation, and who are actually the ones that will undertake it, are expecting of the future. Since these are the frameworks to which they refer in making decisions and undertaking actions, they may actually become transformed into agendas and programs which are indeed quite powerful in structuring “real” technological, political, economic, or cultural futures (Dierkes et al. 1992; van Lente 1993; van Lente and Rip 1998; Canzler and Dierkes 2001; Konrad 2004). Self-fulfilling or -defeating prophecies, as it were. The prophecies which we have a look at in this chapter are based on different methods and refer to diverse application areas. Some are purely qualitative, building on narrative storylines, some are the result of numeric modeling. Some refer to energy – including electricity, gas, heating, mobility – others only to electricity. And some look at the world, or Europe, and others specifically at Germany. The overview does not aim at giving complete information on all the imagined futures, but attempts to sensitize us about the breadth of assumptions and expectations that various actors arrive at by using various methods. Choice of studies has therefore been led by three considerations: (1) to cover a wide scope of different approaches, (2) to capture the most influential prophecies (either because they are most discussed or because they are authored by important actors), and (3) to restrict the discussion to studies that are, with respect to their geographical and thematic focus, relevant for micro cogeneration. Besides explicit mention of micro cogeneration, this refers to the role of CHP in general, the role of distributed generation (DG), or the development of the

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heat market. Finally, we are sensitive to statements about the future development of competing options, from which limited application potential for micro cogeneration could be derived. Our intention is that, by unfolding the diversity of future expectations, they can work (on us and the reader) as a “self-reflecting prophecy”, i. e., a form of viewing the future that does not tempt us to follow too straightforward a path or argumentation on the basis of given assumptions, but rather to keep in mind the contingencies that are involved and strive for problem analyses and strategies which take a balanced stance with respect to alternative developments that may occur (Voß et al. 2005). In some respects, this may even be a reason to look for different kinds of strategies that put emphasis on experimentation, adaptability, cooperation, and robust strategies in order to be prepared for unexpected things to happen (Axelrod and Cohen 2000; Voß and Kemp 2005). 2.3.1 Types of Energy Scenarios In looking at the diversity of future narratives about energy, it is helpful to build some broad types, which are characterized by differences in purpose, method, and scope. The following Table 2.1 gives an overview of different types of energy scenarios that we have analyzed. The paragraphs following the table give a brief introduction to each type of scenario-study and outline the findings with respect to relevant aspects. 2.3.2 Forecasting Energy forecasting exercises aim at predictions of future energy demand and production structure, including primary energy consumption, types of end use, technology, and fuel mix. The methodological approach is based on economic modelling, including extrapolation of past trends via statistical data series, sometimes complemented by interviews with stakeholders. Energy forecasting usually builds on the assumption that political, social, and economic framework conditions are constant, that technology development moves on continuously, and that no other disruptive events will change the course of affairs. Within the framework assumptions, the models usually link input variables such as economic and demographic development, settlement structure, and primary energy reserves to output variables like primary or end-use energy consumption, fuel mix, prices, and emissions.

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Table 2.1 Overview of different types of energy scenarios Forecasting Studies included

Prognos 2000, Pfaffenberger and Hille 2004

Technology foresight Larsen and Sønderberg Petersen 2002 (Risø), Nakicenovic and Riahi 2002 (IIASA),

Holst Jørgensen et al. 2004 (EurEnDel)

Policy scenarios Fischedick et al. 1999/2001 (Wuppertal Institut), Matthes and Cames 2000 (Öko-Institut), Fischedick et al. 2002 (UBA), Diekmann et al. 2003 (DIW), Nitsch et al. 2004 (DLR), Velte 2004 (EurEnDel) Construction of desirable target states for energy system

Explorative scenarios Patterson 1999, Shell International 2001, IEA 2003, Jäger et al. 2004 (IMV)

Purpose

Prediction of energy consumption and fuel mix

Anticipation of technological developments

Method

Quantitative (economic) modelling

Delphi, Expert study

Quantitative (economic) modelling

Treatment of technology

Efficiency improvements as external variable 2020

Explicit treatment as variable

Explicit treatment as building block

Exploration of the breadth of possible energy system developments Identification of key factors, cross-impact analysis, narrative storylines Explicit treatment as variable

2020-2100

2020-2050

2025-2050

Germany

Europe, World

Germany

Primary energy, End-use Energy, electricity

End-use Energy

Primary energy, heating and electricity

Germany, World End-use Energy, electricity, utilities

Time horizon Regional scope Thematic scope

In our sample of future studies, the Prognos Energiereport III (Prognos AG 2000) and a study by Pfaffenberger and Hille (2004) represent forecasts for the German energy market in 2020. The Prognos report is widely referred to in energy science and policy in Germany. The study by Pfaffenberger and Hille is the most recent energy forecast available. It has

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been commissioned by the incumbent electricity-producer associations and deals in some detail with the prospect of CHP. Both energy forecasts assume a certain market for CHP, but make the qualification that CHP development depends on its economic competitiveness. Because oil or gas are generally the cheaper alternatives, restrictions to competitiveness are seen especially on the heat side. Competition is exacerbated by a continuously decreasing heat demand, prompted by political regulation. Prognos assumes heat demand in households to decrease from 2064 to 1990 PJ from 1995 to 2020, and in small businesses from 776.8 to 500 PJ. Also, emission trading is projected to have a negative impact on the competitiveness of CHP, because competing systems, namely conventional individual heat systems, are not subject to emissions caps. Nevertheless, both forecasts assume total electricity production from CHP to increase. Pfaffenberger and Hille suggest an increase from 10 % of electricity production today to 16 % in 2020. Prognos predicts that many new gas power plants will use CHP technology. The growing share of CHP in electricity production is not due to a widening of district heating areas, but to increased densities of connection and a higher power-to-heat ratio. These developments for CHP in general, however, cannot simply be transferred to micro cogeneration. In fact, centralized CHP is in competition with micro cogeneration. Pfaffenberger and Hille explicitly examine several variants of small-scale co-generation, including fuel cells, Stirling motors, micro gas turbines down to 30 kWel, and reciprocating engines down to 1 kWel. The latter is attested to be of “minor importance”, Stirling motors are not considered a viable option because of their low power-to-heat ratio, fuel cells and micro gas turbines are presented as technically interesting, but not yet marketable. Furthermore, it is assumed that fuel cells will become competitive more in the range of higher capacities. Prognos, by contrast, does not specifically assess micro cogeneration development, but casually mentions that decentralized cogeneration in reciprocating engines may become an attractive option in case of increased transmission costs. With respect to distributed generation, Prognos states higher shares than Pfaffenberger and Hille. Whereas the former refers to reduced transmission losses through decentralized generation, the latter point out the economies of scale of central generation. With respect to competing options to micro cogeneration, both forecasting studies expect stable developments in conventional heating technologies (oil, gas, and district heating) and a slow, long-term increase in solar thermal energy use. Altogether, micro cogeneration is portrayed as being of minor relevance for future energy systems until 2020. This matches the generally conservative orientation of future outlooks which are based on the

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extrapolation of existing framework conditions and economic investment behavior. In this framework of future thinking, micro cogeneration may only become an option in case of excessive transmission costs and, even then, it is restricted by decreasing heat demand and strong competition with conventional heating technologies. 2.3.3 Technology Foresight Technology foresight studies share with energy forecasting the aim of developing reliable expectations about the future by determining ‘most probable’ paths of future development. But they have a more specific focus than energy forecasting. They try to determine future advances in specific technologies, their costs and probable role in a future energy system. Methodologically, technology foresight studies are usually based on expert knowledge about application potentials, “technological maturity”, and critical factors for further development of cost and performance, for example on the basis of learning curves. Three technology foresight studies are included in our analysis. The Risø Energy Report 1 (Larsen and Sønderberg Petersen 2002) focuses on Denmark, but also discusses European developments. It has been chosen because the specific technology assessments are embedded in a secondary analysis of important global energy scenarios and, therefore, integrate other influential viewpoints on the future of energy systems. The study covers global developments until 2050 and explicitly deals with a range of “clean power generation” and “cross cutting” technologies, CHP being one of the latter. A second study was carried out at the IIASA by Nakicenovic and Riahi (2002) as a secondary analysis of assumptions about technology development in a broad range of other studies. Its aim is to assess the role of change in various technologies (including generation technology, fuel production, carbon sequestration, transport, and energy consumption) across a number of scenarios, with a time horizon of 2050 to 2100. Ultimately, it aims at identifying core technologies that are robust across scenarios and can contribute to a sustainable energy system. The third technology foresight is the recent European Energy Delphi (EurEnDel) (Holst Jørgensen et al. 2004). EurEnDel sets out from a perspective that views technology development as a social process influenced by policy decisions and public acceptance. This leads to a cautious understanding of predictive capabilities using a combination of Expert Delphi methods with a qualitative assessment of the compatibility of specific technology developments with certain dominant cultural values. From this comparison, three alternative qualitative scenarios are generated. Here, we

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focus on the results of Expert Delphi which predict the timing of technology development in energy efficiency, transport, storage, and supply in a timeframe until 2020. A first interesting aspect to note is that the studies by IIASA and Risø arrive at quite distinctly different conclusions, even though they largely refer to the same global energy scenarios. While IIASA sees nuclear energy as a ”robust” option for the second half of the century, Risø puts it up to political will whether the technology will have a future. It also issues the statement that a decentralization of the electricity system is likely to occur - a topic on which IIASA does not comment at all, restricting itself to various generation technologies without discussing their embedding in a system of supply. Risø also explicitly mentions CHP as a cornerstone of Danish energy policy and as a “promising technology” for achieving CO2 reductions in the future, whereas it is not an explicit topic for IIASA and EurEnDel. Fuel cells, however, are a prominent technology in all reviewed studies. EurEnDel generally discusses fuel cells only for mobile purposes, but also mentions in a casual remark that “diffusion of residential CHP/fuel cells may contribute to increasing energy efficiency of buildings” (Holst Jørgensen et al. 2004, p. 83). IIASA identifies fuel cells (along with nuclear and photovoltaics) as one of a few “robust” technologies that will become relevant in the second half of the century. The Risø authors are more optimistic and expect specific types of fuel cells to be marketable in 2010 and play a major role in another 10-15 years. While IIASA does not make reference to fuel cell applications in CHP, Risø states that, “forty years from now, nations with access to natural gas may have completely replaced their conventional CHP installations with solid oxide fuel cells” and “micro cogeneration such as small-scale fuel cell systems based on natural gas may become commercially available in the near future. Benefits of CHP thus extend into sectors presently covered by e. g. domestic boilers” (Larsen and Sønderberg Petersen 2002, p. 17,19). With respect to heat market developments, IIASA and Risø remain silent. EurEnDel quotes experts who expect 50 % of new buildings until 2026 will be low-energy houses, and emphasise the robustness of lowenergy building technology across three scenarios which emphasize individual choice, ecology, and social equity as different value orientations for policy-making. Biomass for heating and district heating is expected to be “widely used” in 2017. While IIASA does not touch upon decentralization of energy systems, both Risø and EurEnDel issue the expectation that distributed generation will become more widespread due to benefits for the environment, wealth, quality of life, and security of supply. EurEnDel quotes Delphi statements about on average a 30 % share

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of power generation to be below 10 MWel by 2021. They add, however, that R&D activities and appropriate regulation are prerequisites for this expectation to be realised. As mentioned with respect to heat market developments, all three studies expect energy-efficient housing technology to become an important competing option to micro cogeneration. Also, reference was made to district heating, possibly based on biomass, as an ecologically attractive competitor. Interestingly, EurEnDel also discusses the construction of international electricity transmission lines to transport regionally produced renewable energy over long distances. This may be a potentially competing development to decentralized generation, which some experts expect to come into play between 2024 and 2042; 16 %, however, think that this will never occur. The Risø report, starting out from an analysis of current Danish energy policy, identifies limits to decentralized CHP in systems where it already has a high share, especially when combined with a high share of fluctuating input from renewable generating technologies. Although the three technology foresight studies do not elaborate on micro cogeneration as a central technology of the future, we can summarise our review with the assessment that it is considered as a possibility and an interesting option by some. It also matches the expectations about a decentralization of electricity generation structures. However, the discussion of micro cogeneration is mainly a by-product of their consideration of fuel cells: a technology that attracts considerable attention and fuels expectations about fundamental change in energy systems. Other micro cogeneration technologies are not on the agenda. The foresight studies raise concern about restraints and competing options, such as decreasing heat demand, district heating, large-scale renewable energy import, or a large share of fluctuating electricity generation from renewable sources. A general lesson put forward by the technology foresight studies is that there is a broad array of possible future technology options. As technology development depends on social factors, including policies and value preferences, it is difficult to make reliable forecasts with respect to future technologies. As a safeguard against strategic failure because of wrong expectations, technology foresight studies advise us to consider and support a broad portfolio of technologies and to identify “robust” strategies that may work in different contexts.

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2.3.4 Policy Scenarios Policy scenarios follow quite a different philosophy than the sorts of energy forecast and technology foresight studies which have been discussed above. Instead of trying to find out about the most probable course of energy system transformation, they take as a starting point the view that this course can be deliberately shaped by society. Visions for desired states of future energy systems and possible ways to implement policy goals are what they are concerned about. Policy scenarios are constructions of feasible and consistent paths of energy system development which can be achieved with certain activities under certain framework conditions. As such, they can give strategic guidance to the policy process, explicate consequences of action and non-action, and can be used to demonstrate the feasibility of general goals (e.g., decommissioning of nuclear power, reduction of dependence on fuel imports) in political discourse. The usual structure of policy scenarios is a reference scenario (businessas-usual) which is contrasted with alternative scenarios that can be achieved if different political activities are undertaken. The reference scenario may be differentiated into a set of forecasts based on varying framework parameters. The scenarios which represent policy strategies can either be constructed starting from certain policy instruments, whose effect on the energy system is simulated with the help of (economic) models, or they can be constructed starting from policy goals (usually quantitative emissions reductions targets), from which necessary development steps and measures are derived via qualitative and quantitative backcasting (Robinson 1982; Robinson 2003). The variables from which policy scenarios are built are much the same as in energy forecasting. Economic and demographic development, housing structure, prices, and sometimes technology are common input parameters, energy use and emissions common output. Input parameters may be manipulated according to policy preferences, e.g. phase-out of nuclear power or growing shares of renewable generation. These kinds of scenarios make heavy use of economic modelling; but there are also exercises which produce qualitative scenarios through discussion of stakeholders’ and experts’ views. In our analysis, we include seven scenario studies for Germany that have become influential in political discussion there. The oldest one under review is the “nuclear phase out” study produced at the Wuppertal Institut (Fischedick et al. 1999/2001). Its aim was to construct possible nuclear-free futures for Germany, covering a timeframe up to 2030. Also, the “energy turnaround” study, worked out at the Öko-Institut by Matthes and Cames (2000), aims at outlining a sustainable future energy system with a time horizon up to

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2020. The same goal is pursued by the “long-term scenario” study commissioned by the federal Environmental Agency of Germany (Umweltbundesamt, UBA), which extends the time horizon to 2050 and has also been conducted by the Wuppertal Institute (Fischedick et al. 2002). A politically relevant document is the report of a parliamentary commission on “sustainable energy provision under conditions of liberalization and globalization” until 2050 (Enquete-Kommission 2002); it, however, presents only the opinion of the ruling parties, the Social Democrats and Greens, because no consensus could be achieved. A study named “Policy scenarios” by the German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung, DIW) and other institutes (Diekmann et al. 2003) evaluates the impact of climate protection policies and suggests further possible policies following 2012, using various timeframes up to 2050. Another one commissioned by the Federal Ministry for the Environment, carried out by the German Aerospace Center (Deutsches Zentrum für Luft- und Raumfahrt, DLR), the Wuppertal Institute, and other institutes (Nitsch et al. 2004), concentrates more specifically on the “ecologically sound extension of renewable energy sources”, and is the foundation for the CHP study of Krewitt et al. (2004), which is described in Sect. 3.3. And finally, the scenario part of the EurEnDel study (as opposed to the Delphi part) has also been analysed (Velte 2004). Though we have assessed more policy scenario studies than other types of studies, the sample is the most homogeneous with respect to methods and results. The reference scenario is usually based on the forecasting results of Prognos. Policy scenarios are constructed via (economic) modelling. There is remarkable convergence about what is necessary to build a sustainable energy system. Without exception, all climate protection scenarios assign CHP a crucial role and sketch a strong increase in electricity production from CHP. The Öko-Institut study (Matthes and Cames 2000), as well as the three to which the Wuppertal Institute has contributed (Fischedick et al. 1999/2001, Fischedick et al. 2002, Nitsch et al. 2004), assume at least a doubling of CHP electricity. While Fischedick et al. sketches this out until 2020, the Öko-Institut assumes a doubling as possible even by 2010. Diekmann et al. (2003) see new gas power plants being almost exclusively constructed as CHP plants. It is expected that the share of electricity produced by CHP will be 30 % in 2020 (Öko-Institut scenario “Policy”) or up to 40 % in 2050 (Enquete-Commission scenario “Energy efficiency”) If technical potential was fully exploited without concern for political and economic restrictions, even 40% in 2020 could be achieved according to the Öko-Institut (scenario “Potential”). Besides district heating, CHP is

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expected to be used in the industrial sector and in the supply of individual properties. There is also convergence across climate protection scenarios with regard to natural gas and biomass becoming the standard fuels for CHP. It is especially decentralized, small CHP that will contribute to this development. For example, Nitsch et al (2004). expect that, of a total of 80GW newly installed capacity, seven GW will be in the form of gas-fired small heat and power plants until 2020 (scenario “Naturschutz Plus I”). Not all studies are explicit as to just how small CHP will become. Fischedick et al. (2002), Matthes and Cames (2000), and Nitsch et al. (2004) expect the supply of individual buildings to be an interesting option.2 Improved ecological performance of micro cogeneration is expected with the arrival of fuel cells and micro turbines. Fischedick et al. elaborate in some detail possible micro cogeneration technologies. In their “sustainability scenario”, CHP includes decentralised heat and power plants, micro gas turbines, Stirling motors, and fuel cells. Fuel cells are also expected to be a promising technology by both Diekmann et al. (2003) and Nitsch et al. (2004). Finally, Diekmann et al. emphasise that a massive expansion of CHP will not come on its own. Even if some expansion is portrayed by the business-as-usual scenario, strong policy intervention is necessary to compensate for price pressure stemming from the liberalization process and to lift CHP shares in electricity generation to the desired level. All scenarios assume a decreasing heat demand due to improved insulation, energy efficient heating systems, and “smart” buildings. This development is even present in business-as-usual scenarios and is reinforced in the climate protection scenarios. To reconcile this development with the desired expansion of CHP power, climate protection scenarios postulate a massive switch from gas- and oil-based individual heating systems to district heating, both in private households and in the business sector. (For example, Fischedick et al. (2002) assume in their “sustainability scenario”, that by 2050, 60 % of heat demand will be covered by district heating.) Besides switching to district heating systems, all but Fischedick et al. (1999/2001) (which focuses on the power sector and therefore does not discuss the issue) assume a switch towards individual heating systems based on solar thermal, biomass, or geothermal energy.

2

Matthes and Cames remind us that micro cogeneration can be ecologically inferior to centralized CHP, and should therefore be considered as a “fall-back option” where centralized CHP is not available.

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Besides convergence on CHP matters, there is also a relatively broad consensus in policy scenarios about decentralized and distributed electricity generation as a building block for a sustainable energy future. Decentralized generation is a prerequisite for employing many renewable energy sources, such as biomass, because of their low energy density, as pointed out by the Enquete-Commission. The same applies to CHP because of difficulties in transporting heat over great distances. Nitsch et al. (2004) see synergies between CHP and the use of renewable energy sources in so far as the former can help to shape distribution structures toward the needs of the latter. Reference is also made to public resistance against the locating of large power plants as another driver for decentralization. Velte (2004) expects in her scenario 1, “Change of Paradigm”, that “more than one third of Europe’s electricity production takes place in distributed generation facilities” (Velte 2004, p. 21). For co-ordinated operation of distributed facilities and network management, Fischedick et al. (2002) and Diekmann et al. (2003) point to the importance of intelligent load management in “virtual power plants”, which Diekmann and co-authors expect to be possible by 2030 . Matthes and Cames (2000) as well as Nitsch et al. (2004) raise concerns about whether decentralization is the only and optimal strategy for sustainable energy supply. They point to the possibility of a highly centralized system, with imports of huge quantities of electricity or hydrogen produced from renewable sources in the Earth's sun belt. Fischedick et al. think its possible to combine both strategies. In the policy scenarios, three developments are emphasised which could compete with the introduction of micro cogeneration: decreasing heat demand, import of renewable energy, and some kinds of domestic renewable use. Decreasing heat demand means that a massive increase in the number of users of CHP (district heat or micro cogeneration) is necessary in order to provide sufficient heat sales to run CHP (see Sect. 3.3). Even so, Matthes and Cames (2000) assume in their scenario “Policy” that CHP heat sales can at best be stabilized by increased industrial use of CHP and improved power-to-heat ratios. Nitsch et al. (2004) are more optimistic, saying that “a further expansion of (decentralized) CHP is compatible with a strategy of substantially decreased heat demand and even offers considerable enlargement possibilities” (Nitsch et al. 2004, p. 28, authors’ translation). Both studies also discuss the import of large quantities of renewable power or hydrogen from geographically remote areas as an option after 2030. With respect to possible competition between the use of domestic renewable energy sources and CHP the picture is more complex. There is compatibility when renewable fuels can be used for CHP. Biomass, biogas, and geothermal

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energy are suitable for this purpose. Fischedick et al. (2002) suggest, however, the use of renewable energy sources rather for district heating than for micro cogeneration, because of higher cost efficiency. In their “long-term scenarios”, like Matthes and Cames (2000), they see fossil fuels in CHP as a „bridging technology” for later substitution by biomass or biogas. Furthermore, CHP, even if gas-fired, may structurally pave the way for an increased use of renewable energy. Distribution grids and load management systems that can manage distributed CHP generation can later be utilized for the uptake of power from windmills or photovoltaics. Against this background, Matthes and Cames (2000) as well as Fischedick et al. (2002) and Nitsch et al. (2004) consider CHP a building block for the expansion of renewable energy carriers. On the other hand, electricity produced by fossil-fuel-based CHP competes with electricity from windmills, hydroenergy, and photovoltaics. The studies differ in their assessment. Fischedick et al. (2002) suggest that CHP power, after a growth phase, will have to decrease again to make room for renewable energy use. Nitsch et al. (2004) expect that competition will only take place in the long run, whereas, up to 2030, there is enough conventional power to be substituted by both CHP and renewable energy. The Wuppertal Institute nuclear phase-out study explicitly states that there is no competition: “Climate protection goals can only be reached by combining all the strategic climate protection options available (…) e.g., extension of CHP, application of renewable energies in the power sector, fuel switch by extended gas combined cycle power plants.” (Fischedick et al. 1999/2001, p. 33, authors’ translation). Finally, there is potential competition between heat produced on a CHP basis and renewable space heating, e.g., solar thermal applications, wood pellet heating, or geothermal technologies. Nitsch et al. (2004) reflect upon this topic, suggesting that biomass should be rather used in CHP than in heating alone, because CO2 emissions reductions are greater. The complicated relationships suggest that (micro) cogeneration strategies need to be diligently adjusted to strategies for heating efficiency and renewable energy production. To sum up, climate policy scenarios for the ongoing energy transformation assign a central role to CHP. Some explicitly include micro cogeneration in their considerations. From an environmental point of view, it is important, though, to fine-tune a micro cogeneration strategy to suit central CHP, renewable energy use, and strategies for reduced heat demand. The scenarios present a remarkable contrast to energy forecasting studies: While the latter do not see much growth potential for CHP, especially for district heating, which is even predicted to decrease, the policy scenarios construct possible developmental paths in which CHP

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comes out with a great potential and plays a major role in the energy transformation. This, however, is linked to respective policies and framework conditions. 2.3.5 Explorative Scenarios Similar to policy scenarios, explorative scenarios do not aim at the prediction of the most probable future, but rather at the exploration of possible developments. In contrast to policy scenarios, however, they do not have such a strong focus on normative goals and policy output. Explorative scenarios are instead intended to raise awareness about the breadth of developments which may possibly take place, irrespective of their desirability. Accordingly, these scenarios comprise a much broader and heterogeneous set of variables in thinking about the future than do forecasts and policy scenarios. They do not restrict themselves to consumption quantities, prices, regulations, fuels, or emissions, but also include factors from various dimensions such as cultural values, social practices of energy use, public opinion, political institutions and power relations, market structures, and even completely new technological systems with different performance characteristics. Because many of these factors and their interrelations cannot be modelled in quantitative terms, such scenarios often work with qualitative or semi-quantitative methods. These range from the free creation of narrative storylines elaborated over the systematic unfolding of possibility spaces along the axes of a few main variables, to the analysis of system dynamics with the help of cross-impact matrices or conceptual modelling. Often they involve participatory processes making use of diverse sources of expertise. The result is usually a set of scenarios which represent the extremes of structural variation. In this review, we include four explorative scenario studies, which apply different methods and cover different aspects of the energy system. The Shell scenarios (Shell International 2001) cover global energy system developments until 2050 and are based on a method developed for coping with uncertainty about the development of business environments. Two scenarios flesh out the storylines “dynamics as usual” and “spirit of a coming age”, using the axes of resource constraints, technology development (mainly hydrogen and photovoltaics), and social and personal priorities as key variables. A quantification of key figures has been attached ex post. We include the Shell scenarios because they are among the most well-established explorative scenarios worldwide, with a tradition going back to the beginning of the 1970s.

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The International Energy Agency (IEA) presents a study which first undertakes a general review of global and national energy scenario studies and then develops its own set of four scenarios out of them (IEA 2003). Three of these are explorative, one is normative; the three scenarios differing most from “business as usual” have been fleshed out in more detail. The explorative scenarios which are taken into account here are constructed around the main axes of speed of technology development and strength of concerns for the global environment. The IEA scenarios are included because they are the only explorative energy scenarios by an international governmental body. In an explorative scenario exercise which has been carried out as part of an ongoing project on utility system development in Germany, “Integrated Microsystems of Supply” (Integrierte Mikrosysteme der Versorgung, IMV)” (Jäger et al. 2004), four scenarios have been constructed which describe the structure of electricity, gas, water, and telecommunications provision in Germany for the year 2025. Special attention is put on decentralization, service orientation, and interlinkages between the sectors. The scenarios rest on the variation of around 30 key factors; the four most extreme scenario frameworks have been fleshed out narratively and with some quantitative figures. We include these scenarios because they represent expectations of stakeholders who will practically shape the transformation in their daily business. Methodologically, all three studies are based on participatory processes and stakeholder and expert consultations. By contrast, Patterson (1999) is actually an essay about a fundamental transformation in electricity systems. It is concluded, however, with two elaborate scenarios of the shape of electricity systems in 2020, “traditia” and “innovatia”, which are presented in form of fictive conversations by the people who inhabit them. The scenarios are freely created narratives, although rooted in analytic understanding of the dynamics of electricity system transformation as elaborated in the first part of the book. Because of its peculiarity we have made this study part of our sample. Micro cogeneration is explicitly mentioned in all studies. It is treated in the most detailed manner in the IMV scenarios, where differentiated shares for micro cogeneration below 4.6 kWel and mini cogeneration below 100 kWel are given for each scenario. Depending on the political and social context, electricity generation shares reach numbers of 2 % (all mini cogeneration) in Scenario D, 3.5 % (0.5 % micro, 1 % mini) in scenario C, 4 % (1 % micro, 3 % mini), and up to 7.5 % in scenario A (2.5 % micro, 5 % mini). Generally, the shares of micro and mini cogeneration increase when scenarios assume a more participatory policy style, more ecological concern, a more competitive market environment with many actors, and a

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more rapid pace of technology development. Scenario A, characterized by all those features, is most supportive to micro cogeneration. They are assumed to function on the basis of reciprocating engines in the first years, and with larger shares of Stirling engines and fuel cells, partly fired with biogas, towards 2025. Micro cogeneration is expected to be embedded in “virtual micro-utility systems” which coordinate electricity, heat, and water production and consumption on the level of buildings or blocks with the help of Information and Communication Technology (ICT) for monitoring and control. The other studies also consider micro cogeneration as part of the energy system transformation. The IEA study (IEA 2003) concludes after a comparison of three explorative scenarios, that CHP and micro cogeneration technology are the fifth and sixth most important technology areas out of 16 which appear across all scenarios. This leads them to conclude that the area is ripe for development (p. 108). The scenario “Clean but not sparkling” states that, “In nearly all OECD countries microgeneration and cogeneration in a distributed fashion would increase significantly” (p. 69), initially based on fuel cells, which would then lose out towards 2050 against micro turbines in competition over costs. Whereas Shell only takes short notice of micro cogeneration, as a sideeffect accompanying fuel cell development (Shell International 2001, p. 48), Patterson even sees micro cogeneration as a driver for distributed generation options, stating that “as the cogeneration option becomes more widely recognized, its application is going to expand rapidly, onto sites with successively smaller loads (…). In due course the spread of cogeneration in turn may encourage on-site generation of electricity even when no heat is required.” (Patterson 1999, p. 147) Conventional CHP, however, is not given much attention in either of the studies. IEA just mentions in its “Clean but not sparkling” scenario that a strong efficiency increase with existing technologies represents a good environment for CHP. IMV again gives quantitative figures, which range from 17.5 % of total electricity in CHP (including mini and micro) in scenario A, over 15 % in B, 5 % in C down to none in scenario D. They also mention that in scenario A and B it is plausible that 2 % of total electricity are generated by biomass-fired CHP. Developments with respect to distributed generation again attract great interest in explorative scenarios. Decentralization actually seems to be one of the main storylines which are explored in recent scenario work on the transformation of energy systems. In the course of the general analysis which precedes his scenarios, Patterson offers the following explanation:

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In a liberal competitive framework, investors are more likely to choose smaller generating units which can be built, commissioned, come into service and begin earning a return rapidly. Liberalization also clears away obstacles to on-site generation and cogeneration, and allows entrepreneurial participants to negotiate innovative contractual arrangements, including technical arrangements, among themselves with minimal interference from government. (Patterson 1999, p.148).

In his scenario “Innovatia” (Patterson 1999), he works this latent dynamic out into a story about electricity system regulation failing to assure the provision of system services (load-following), which results in frequent black-outs and rapidly increases the attractiveness of on-site generation for purposes of security of supply. On-site generation then later turns into “local generation, for clusters of users close together” (p. 163), such as housing estates acquiring their own local power station to supply complete electricity and heat services as an add-on to their customers. Similar to Patterson, Shell also comes up with decentralization as a general trend. As the third out of five features which the two scenarios have in common, they refer to “the shift towards distributed or decentralised heat and power supply for economic and social reasons” (p. 58). As with the “Innovatia” scenario by Patterson, it is their scenario “Spirit of a coming age” in which this trend fully unfolds. For Shell, distributed generation could plausibly be driven by fuel cell applications which “start with stationary applications to businesses willing to pay a premium to ensure highly reliable power without voltage fluctuations or outages. This demand helps drive fuel cell system costs below $500 per kW, providing a platform for transport uses and stimulating further cost reductions” (p. 48). They continue the storyline: Suppliers of home appliances become major manufacturers and distributors of stationary fuel cells to compensate for saturated OECD markets for their existing products. Commercial and residential buildings take advantage of these low-cost fuel cells, and established natural gas grids, to produce and trade surplus peaktime electricity through internet markets. Hot water is provided by surplus fuel cell heat.

In contrast to Patterson and Shell, IEA and IMV make decentralization a distinctive factor between different possible transformation paths. IEA says about its scenario “Dynamic but careless” that it privileges centralized generation for economies of scale and lower costs (IEA 2003, p. 81).3 The

3

However, even in this case decentralized generation is not ruled out completely, if it can compete on the basis of costs. This opens opportunities in areas which

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scenario “Bright skies”, on the other hand, features a strong increase in decentralized generation as it would allow a decrease in transmission losses (IEA 2003, p. 94). IMV differentiates between technological and organizational dimensions of decentralization in its scenarios about future developments in the utility system. In scenarios A and C, technological decentralisation is high, including large shares of distributed generation. In scenario A, this development is part of technology development driven by societal needs, and part of integrated customized utility services. In scenario C, distributed generation is embedded in fuel-cell-based strategies of international oligopolists. With respect to developments in the heat market, IMV as well as IEA scenarios are interesting in so far as both speak of factors leading to decreasing heat demand as well as countervailing factors which could secure application potential for CHP. IMV scenario B mentions increased rates of population living in suburbs and increased living area per person as factors which can offset increased heating efficiency. IEA scenario “Bright skies” states that, in the residential sector, CHP would be more broadly used at the same time as solar systems become integrated into buildings for water heating and for power production, more efficient heat pumps would be used for space conditioning in buildings, and passive heating and cooling systems and architectures would also be developed. Building management systems using ICT to monitor and control the energy needs of entire buildings would become increasingly common (IEA 2003, p. 95). The latter reference to the IEA scenario already shows that competing options such as solar thermal energy use, district heating, passive heating, or fluctuating renewable energy production are often mentioned to increase in parallel with micro cogeneration. This lack of making possible competition explicit is either a sign of imprecise reasoning in scenario construction or expresses the tacit assumption that competition will not become strong enough to block either option completely. In overview of the explorative scenarios it can be said that micro cogeneration, together with large CHP and distributed generation, especially in fuel cells, is actually one of the central socio-technical configurations whose future is explored by scenario studies which search for possibly path-breaking developments that of the energy transformation may lead to.

are sensitive to supply shortages – areas widened after 2015 because of security concerns about terrorism.

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2.4 Conclusions Looking at the four different scenario types we have reviewed, namely forecasts, technology foresight, policy scenarios, and explorative scenarios, it is clearly evident that micro cogeneration is treated in very different ways. This concerns especially whether micro cogeneration is given explicit consideration as an element in the transformation of energy systems and, if so, the role assigned to it. First of all, it is important to notice that even scenario studies of the same type come up with diverging expectations with regard to the role of micro cogeneration. This supports the suspicion that projections about future developments are influenced by the specific actor perspectives and contexts from which they are undertaken.4 A second aspect is that, beyond the idiosyncrasies of every scenario study, there are also commonalities among studies of the same type. Whereas in forecasts, micro cogeneration does not appear as an important feature of future energy systems or, if so, then only as back-up for premium security of supply, in technology foresight studies it is recognized as a possible application for fuel cells which are considered a potential breakthrough technology. In policy scenarios, it is put forward as part of CHP in general, as one of the most essential elements to achieve climate protection goals; and in explorative scenarios, micro cogeneration plays an important role in driving and being driven by possible developments towards technological decentralization. The review has thus explicated different interpretations and expectations of actors and revealed varying strategies towards micro cogeneration. Energy policy based on forecasting exercises will be assured that general lines of policy do not have to change, because no changes are to be expected in the structure of the electricity system. And, if there was a market price for the extra security service of distributed generation, micro cogeneration could smoothly enter the market. Innovation policy oriented towards upcoming technologies and informed by technology foresight studies would take care to build up domestic R&D, in order to be part of and possibly lead a breakthrough in the fuel cell market. It is fine, if fuel cells are applied in micro cogeneration but what counts is a novel technological principle, not the performance of actual socio-technical configurations. Climate policy, looking out for blueprints of sustainable energy systems, will take policy scenarios which tell them that CHP is a necessary building block and that overall potential can be extended – if micro applications are added to the portfolio. Finally, companies, and other 4

Other insightful comparative reviews of several energy scenario studies can be found in Smil (2003) and Enquete-Kommission (2002).

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actors who draw on explorative scenarios to cope with uncertainty and increase strategic capacities to act under different paths of energy system transformation, will include micro cogeneration in their portfolio as an option for the decentralization path, should it occur. Since all of these – energy policy, innovation policy, climate policy, companies, and other actors – strongly influence the actual dynamics of energy transformation in general, and micro cogeneration innovation in particular, the different roles of micro cogeneration articulated in the scenarios are all “real” in the sense that they may have some kind of an effect on what the future will actually be. This will largely depend on interactions between the actors who hold the different views supported by the scenarios. Against this background, it is worthwhile to undertake a critical evaluation of the realities (re-)produced by the scenarios. As a general conclusion from all reviewed scenarios, it appears that micro cogeneration sits somehow in a neglected corner of perspectives on energy transformation. It is either overshadowed by distributed generation, the fuel cell, general CHP, or decentralization. As such, it appears as a niche which develops as a by-product of several differently focused actor strategies. That it is still mentioned by all of these different perspectives, however, also shows that it is at the interface of many different concerns and developments in electricity, gas, and heating. There are also important synergies between micro cogeneration and (infrastructural) developments that are linked to more focal concerns like innovation in fuel cells, emission reductions from conventional CHP, structural change towards decentralization, and distributed generation for security of supply. Such synergies include electricity network management, virtual power plant technology, extension of gas grids and so on. It is doubtful, however, if the niche can be extended without the specific qualities and framework requirements of micro cogeneration being explicitly considered in energy transformation scenarios, so that they can become translated into robust strategies. One reason for this is that, besides synergies, there are competitive constellations (e.g., with the promotion of energy efficiency in buildings and renewable energy generation as central elements of policy scenarios for climate protection). These can play out to the disadvantage of micro cogeneration, especially if its role in the energy transformation does not become recognized and properly assessed. In order to keep track of such interlinkages, it would be necessary to produce integrated scenarios which combine the various focal concerns and explore how they may interact or compete. This would be an adequate basis for coordination and careful adjustment of actor strategies such as policies, investment strategies, and consumer choice (Grin and Grunwald 2000; Voß et al. 2005).

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Such scenarios would also need to shed light on some other blind spots of the scenarios we have reviewed (IMV is an exeption here); for example, surprisingly little information is given with respect to the grid. This, in spite of network access and back-up services playing a crucial role for the transformation of the energy system, electricity in particular. Another aspect is even more crucial. This refers to the actors and social institutions which are behind market price developments, regulatory measures, and technology development in the energy system. In the vast majority of scenarios, they are simply neglected. Different states of output variables are assumed without concern for the factors and processes that bring them about. Some of the policy outputs or technological developments assumed or promoted in the scenarios would seem very implausible or even impossible, if the scenarios took account of the development of actor coalitions or institutions blocking or promoting them. Similarly, some variables such as market structure, consumer attitudes, or political institutions are mostly considered as “framework conditions” which are simply assumed to be constant or following trend extrapolations. This stands against the actual dynamics of socio-technical change as elaborated above. According to empirical studies of technological innovation and transformation, factors such as utility organization (unbundling, multi-utility, transnationalisation), user attitudes towards selfprovision, collective action capacity of technology promotion networks, or institutions of energy policy-making would be important factors which restrict or enable certain paths of energy transformation. A more encompassing view on energy transformation which follows the purpose of grasping relevant dynamics and starting points for shaping strategies would require systematically exploring such factors “behind” the economic and technical parameters of energy provision. In any case, however, this much has become clear from our review of conceptual work and scenario studies: The future of energy systems is not something which can be known. It is being created.

3 The Future Heating Market and the Potential for Micro Cogeneration Martin Pehnt, Lambert Schneider

As a cogeneration technology, micro cogeneration delivers two useful products: heat and electricity. Consequently, the successful implementation of micro cogeneration depends not only on the development of the electricity market, but also eminently on the trajectory of development of the heat market. Given the reduction in specific energy demand for space heating, the question arises whether the heat sector actually offers an attractive segment for a new technology line. Based on a description of the current situation of micro cogeneration in Germany, it is therefore our aim to characterize driving factors for the development of the heat market and, based on this, derive a “technical market potential” for micro cogeneration in the residential sector in Germany. We have chosen to focus on the residential sector, because micro cogeneration appears to have a particularly promising future there, due to the existence of a large quantity of single-family houses with relatively low heat demand. In determining this technical market potential, certain technical and non-technical restrictions are considered, such as the existing fuel supply infrastructure or the number of suitable objects, which may present prohibitive barriers for micro cogeneration applications. Please note that in our estimation of the technical market potential, we do not consider further aspects that are important drivers for or barriers of the diffusion of micro cogeneration, such as its economic feasibility compared to other supply options (see Chap. 4), or information on and acceptability of the respective technology (see Chap. 6), administrative and legal constraints (see Chap. 8), etc. Consequently, the technical potential we derive in the following chapter for the residential sector in Germany should be considered as an upper limit for the development of micro cogeneration under the given circumstances.

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3.1 Current Situation of Micro Cogeneration in Germany

Annual capacity additions (MW)

Micro cogeneration is currently still rather insignificant in the German power generation portfolio. In Fig. 3.1, the installation of new micro cogeneration plants (< 15 kWel) in Germany is estimated for the years 1990 to 1998 and 2002 to 2004. Fig. 3.1 shows that only very few micro cogeneration plants were installed during the nineties, whereas, in recent years many more micro cogeneration plants have been installed: mainly the “Dachs”, a successful product from the company Senertec, which was brought onto the market in 1996, and has since then sold more than 10,000 units. Recently, there has been a steady increase, with 50 % more plants being installed in 2004 compared to 2002. This trend is confirmed by the quantities of electricity fed into the grid under the new CHP law, from 1 April 2002 onwards, as reported by the German association of grid operators VDN. Under this legislation, from April to December 2002, new CHP plants smaller than 50 kWel fed only 15 GWh into the public grid, while the quantity increased to 60 GWh in 2003 and 78 GWh in 2004. 12 10 8 6 4 2

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Fig. 3.1. Total annual capacity additions of micro cogeneration plants (< 15 kWel) in Germany from 1990 to 1998 and 2002 to 20041 1

Data from 1990 to 1998 is based on a database maintained until 1999 by ASUE. Data from 2002 to 2004 is based on a recent manufacturer’s survey by Öko-Institut (2005). The database by ASUE cannot be considered as complete; however, with more than 5000 reciprocating engines, it probably covers a large share of actual installations. For the survey by the Öko-Institut (2005), only 23

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The steady increase was made possible by favorable legislation, including tax exemptions for natural gas and electricity and CHP bonus payments (see Sect. 8.1). In addition, increasing electricity prices plus bonus payments for biomass CHP (adopted in 2004) have worked to increase the volume of micro cogeneration plants sold. Based on this information, and taking into account that some micro cogeneration plants have been decommissioned following the liberalization of electricity markets after 1997, we estimate that as of the end of 2004, there is a stock of about 60 MW micro cogeneration capacity in Germany, generating about 240 GWh electricity annually. This is still a very small share of overall electricity generation (about 0.04 %); and, though sales volumes are increasing, micro cogeneration is still a very small niche market, far away from broad market introduction.

3.2 Demand Drivers in the Heat Market Micro cogeneration is particularly suitable in cases where existing gas heating systems need to be modernized, where new houses are built, or where consumers switch from oil or other fuels to natural gas. Thus, the prospects of micro cogeneration will depend on the development of the heat market. Experience in the past has shown that the diffusion of innovative heat systems depends on favorable general conditions and requires time. The diffusion of condensing boilers is a good example that illustrates this point. Condensing boilers gain higher efficiencies because they use latent heat from the flue gas. With the Netherlands and France being pioneering countries, in Germany condensing boilers were introduced in large numbers in 1991. In that year, every major boiler manufacturer began offering condensing boilers. Today, the total number of installed condensing boilers amounts to 1.7 million, with 270,000 systems being sold per year as of 2002 (Fig. 3.2). Since 2003, gas condensing boilers achieved a market share of 39 % of all, or 53 % of gas boilers.

out of 70 manufacturers provided data. However, as the most important producers of micro cogeneration plants responded, we estimate that more than 90% of installed micro cogeneration plants are covered. The 2004 data is based on manufacturer’s estimates as of September 2004.

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Sold condensing boilers (thousands p.a.)

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Fig. 3.2. Diffusion of condensing boilers into the German heat market (Source: IEU 2004)

The successful diffusion in Germany can be explained by a number of favorable market conditions that coincided in the early 1990s. Condensing boilers offered comparatively simple installation and reduced electricity consumption. The German Union of Sewage Water (Deutsche Abwasservereinigung) allowed the discharge of condensing water into the sewage system. Increased marketing efforts pointed toward the environmental advantages (higher efficiency, lower emissions) and lower fuel costs of the technology. At the same time, in East Germany the modernization of many buildings and the restructuring of the economy after reunification stimulated the demand for new heating systems significantly. A number of support schemes by local utilities, the German states (Laender), and from the federal level promoted the use of condensing boilers. In this regard, technical, environmental, economic, market, and strategic aspects simultaneously supported this innovation in the heating sector. Despite this coincidence of many positive factors, the diffusion took a long time to go from pilot testing to market success. Turning to micro cogeneration, it is important to assess whether there is a similar coincidence of driving factors. If one wants to determine the micro cogeneration potential beyond the extrapolation of current trends, considering possible structural changes in the society or in the energy system, the picture becomes very complex, because one has to consider various aspects in determining the structure and level of future heat demand (Fig. 3.3). Each of these aspects will be discussed in detail below.

3 The Future Heating Market and the Potential for Micro Cogeneration

Population development

Development of efficient housing technologies

Technology/ fuel acceptance

Preferences Diffusion of renovation

Building stock (numbers of houses/ apartments …)

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Building structure (single-/multi-family houses, specific area…)

Total heat demand

Specific energy demand

Development of district heat Exchange rate/ life-time of heating systems

Structure of heating systems

Potential for Micro CHP

Fig. 3.3. Influential factors on the development of heat demand and micro cogeneration potential in the residential sector

Population Development Future development of total residential living area depends, first of all, strongly on population development. Estimates of future German population diverge substantially. The Enquête Commission assumes a reduction from today’s 82.2 to 67.8 million inhabitants by 2050, with significant decreases particularly after 2020 (Enquête 2002). The Federal Statistical Office of Germany (Statistisches Bundesamt) forecasts a reduction to only 75 million in 2050, in the business as usual forecast, with possible ranges of between 67 and 82 million (Destatis 2003). Living Area It is likely, however, that, parallel to the downward development of the population, the trend towards larger dwellings and a higher per-capita demand for living area will continue. From 1986 to 2001, the average living area per capita increased from 34.4 to 39.8 m2 (Statistisches Bundesamt 2003a). This trend toward higher specific area demand will further continue. Building Stock and Structures Building stock and structures in Germany are dominated by detached houses with 16.98 million residential buildings existing there in 2001

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Number of residential buildings completed (thsd.)

(Statistisches Bundesamt 2003a). From the existing building stock, 62 % are single-family houses and 20 % are houses with two apartments with the rest having three apartments or more. Most newly built residential buildings are single-family houses, whose share increased from 65 % to more than 80 % in 2002 (Fig. 3.4). This trend towards a higher share of single-family houses will continue. Yet, the absolute number of all newly built residential buildings in 2002 was under the level of 1995. Nevertheless, for micro cogeneration, this trend means that small-sized systems suited for single-family houses will gain in importance.

250

Single-family detached house Single-family terraced house Apartment house (2 flats)

Single-family semi-detached house Single-family other Apartment house (3 flats)

Engl_buildings93_02

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Fig. 3.4. Types of new residential buildings completed in Germany from 1993 to 2002 (Source: personal communication, Federal Office of Statistics and State Office for Statistics and Data Preparation of Bavaria)

Specific Energy Demand To derive final heat demand, not only does the heated living area need to be determined, but also the specific energy demand. With high levels of insulation becoming state-of-the-art, and legislation requiring more stringent insulation standards (German Energy Savings Decree Energieeinsparverordnung, see Sect. 8.1.5), the specific heat demand of new buildings, as well as of the existing building stock, will decrease significantly. Krewitt et al. (2004) assume that, for instance, the specific

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space-heat demand of a single-family house (year of construction before 1986) will move from 262 kWh/m2a to 61 kWh/m2a in 2050, for large multi-family residences (year of construction before 1986) from 160 to 54 kWh/m2a. This reduction evidently decreases overall residential spaceheat demand along with the potential for CHP in the residential sector, because micro cogeneration units have to be designed even smaller than they are, in order to achieve more favorable economic conditions. However, the annual distribution of heat demand will change in a favorable manner for micro cogeneration. As the seasonally varying spaceheating demand decreases due to better insulation, the constant demand for service water will gain in importance. Micro cogeneration plants with small power-to-heat ratios could operate more continuously and longer, improving their economic performance. Rate of Renovation How quickly space heating demand will decrease depends on the rate of renovation of the building stock. Today, about 0.5 % of the buildings in Germany are renovated, and their energy needs optimised, each year (Fischedick and Nitsch 2002), leading to a rather slow decrease in energy demand. However, increased rates of renovation are politically targeted. Structure of the Heating Supply The structure of the national heating supply – the share between district heating, central heating systems for each building, and heating systems supplying one floor – is of relevance, because micro cogeneration is best suited for central heating systems and is in competition with district heating, where larger cogeneration units are applied. Whereas currently 13.7 % of the households in Germany are heated by district heating systems, almost 70 % use block or central heating, and only 7.9 % use heating systems supplying one floor (Statistisches Bundesamt 2003b). The remaining 9.1 % are individual heating systems. Decentralized warm water supply, e. g. from electric warm water boilers, also reduces the micro cogeneration potential. The development of district heating networks determines which of the buildings could potentially be supplied with district heat. From an environmental point of view, district heating is not inferior to micro cogeneration, and typically exhibits better economic performance in areas with higher heating (see Chap. 4). A revitalisation and densification of urban areas would significantly increase the development options for

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district heating. In rural areas, the population density is much lower, with concomitant higher development costs for district heating. However, even in many rural communities, district heat could be realized. Taking the example of a German rural community, Nast (2004) calculates that 86 % of total heat demand is in locations where the total heat losses of the district heating system are below 20 %. The structure of the national heating supply is also determined by the availability of appropriate fuels. For the German building stock in 2002, natural gas had a share of 47.7 % with an increasing trend (Statistisches Bundesamt 2003b). At that time, 31.8 % of flats were heated by fuel oil, 13.7 % by district heating, and 4.1 % by electrical heating systems. Only 1.6 % of flats had free-standing coal-fuelled heating systems. In new buildings, natural gas had a share of above 75 %, fuel oil 13 %, and district heat 8 % (BGW 2003), with rather large regional variations. Natural gas is the preferred fuel for micro cogeneration applications (see Sect. 9.1), and the large, decentralized natural gas infrastructure in Germany is certainly favorable for micro cogeneration diffusion. In the future, renewable fuels, such as wood pellets, geothermal heat, and solar collectors, will play an increasing role (Sect. 3.3). Today (2003), only 4.1 % of the heat in Germany is supplied by renewable fuels. Micro cogeneration plants could in the future also use biomass as a fuel. Several engines on the market are already suited for biogas. The introduction of Stirling engines could facilitate the use of wood pellets. However, a combination of solar collectors and micro cogeneration technologies will usually not be economically feasible, as solar heat generation would reduce the potential operating time of a supplementary micro cogeneration plant significantly. In this regard, the diffusion of micro cogeneration would then also depend on the diffusion of solar collectors. In countries with sufficient solar radiation, solar collectors are likely to be economically and environmentally more attractive than micro cogeneration. Lifespan of Heating Systems Besides these changes in the building stock, the speed of micro cogeneration diffusion also depends on the exchange rate and lifespan of the heating systems. According to the German Energy Savings Decree, particularly old heating systems have to be replaced before 2007.2 This, in 2

According to EnEV §9, heating systems with gaseous and liquid fuels with a year of construction prior to 1978 have to put their heating systems out of operation by 31 Dec 2006. If the burner was replaced after 1 Nov 1996, or the

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combination with the necessary replacement of a comparatively large number of systems installed prior to 1995 in East Germany, will lead to a significant demand for new heating systems. The National Union of German Gas and Water Utilities (Bundesverband der deutschen Gas- und Wasserwirtschaft) estimates that, in addition, approximately 50,000 heating systems will be converted from coal, oil, and electricity to naturalgas-fuelled systems. In the next section, we develop scenarios for the future technical micro cogeneration potential. In doing so, we take the different drivers described above into account. Already at this stage, however, we can summarize some consequences of these trends: x The overall heat demand will decrease significantly, despite an increase in specific residential living area per capita; however, the speed of this decrease will mainly depend on the renovation rate of buildings, which today is still very low. x The structure of heating supply will further shift towards gas-based heating systems at the expense of oil. In addition, renewable fuels are expected to play an increasing role in German heating supply. Whether district heating will succeed in gaining a larger market share remains an open question. From an economic and environmental point of view, an extension of district heating, even in areas with single-family housing, seems possible. The probability of success, however, also depends on various other aspects. x Given the “gas boom” in the early 1990s and the installation of many gas heating systems after reunification, it can be expected that there will be an increased demand for new systems between 2008 and 2015, when these systems have to be replaced (Krammer 2001). Krammer calculates that the largest share of the total gas heating demand in Germany, particularly in the medium term, will come from the modernization of existing gas heating systems.

3.3 The Technical Micro Cogeneration Potential: Scenarios for Germany To get a better understanding of possible future development in the heating sector and the role micro cogeneration could play, we quantitatively system modernized such that the legally required level of exhaust gas losses is met, the system does not need to be put out of operation until 31 Dec 2008.

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investigate two scenarios of future development until 2050. Such a longterm perspective appears important, because investment decisions for power plants and heating systems lock-up capital for a long period. Today’s decisions, for instance in favor of large condensation power plants or with regard to insulation standards for building renovations, will impact the diffusion of CHP technologies and alternative options in the long-term. The following descriptions are based on a detailed energy model and set of scenarios in Krewitt et al. (2004), developed for the German Environmental Ministry (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit), and using the building stock model of the Wuppertal Institut, the renewable energy model of the German Aerospace Center (Deutsches Zentrum für Luft- und Raumfahrt), and the system technology model of the Institute for Energy and Environmental Research (Institut für Energie- und Umweltforschung). Further detailed assumptions, such as potential evolution of the future building market, are described in detail in Krewitt et al. (2004). 3.3.1 Future Heat Demand in the Residential Sector The wide range of possible development paths for future energy demand in Germany can be characterized by using two different scenarios, namely a “reference scenario” – a business-as-usual scenario as described by the Enquête Commission for Sustainable Energy Supply of the German Parliament (2002) – and a “sustainability scenario”. The underlying assumptions of both scenarios are summarized in Table 3.1. In particular, both scenarios assume for Germany an increase in living area, from 3,156 to 4,066 million m2, and a population decline from 82.2 to 67.8 million people. Table 3.1. Future development in Germany: Boundary conditions for the reference and sustainability scenarios Basic data Population (mil) Working population (mil) Households (mil) Apartments (mil) Living area (mil/ m2) Heated useful area (mil/ m2) GDP (bill. Euro 2000)

2000 82.2 37.4 38.1 37.4 3156 1458 2075

2010 82.1 37.6 38.5 40.1 3694 1514 2499

2020 80.8 37.2 38.8 42.0 4016 1539 2953

2030 77.9 34.9 38.1 41.0 4242 1564 3367

2040 73.3 32.3 36.1 39.5 4150 1530 3747

2050 67.8 29.6 33.7 38.0 4066 1509 4089

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The main rationale underlying the two scenarios is described as follows: x In the reference scenario, neither stakeholders from industry and policy nor end-users are expected to change behavior. Energy policy measures which have been agreed upon so far will be implemented, and command and control measures will be adopted to assure implementation of stateof-the-art technology. Open markets for electricity and gas are assumed. The German eco-tax is frozen on its current level, according to existing legislation, and there are no specific targets with respect to the reduction of greenhouse gases. We assume that in the reference scenario the rate of energy-related renovation of buildings remains nearly constant over time, resulting in a heating demand reduction in the residential sector of only 20 % by 2050. x The sustainability scenario, on the other hand, describes a development path which aims at achieving key sustainability targets, including a reduction of greenhouse gas emissions of 80 % by 2050 (compared to 1990) and a phase-out of nuclear energy. The exploitation of large efficiency potentials will be promoted by appropriate policy measures on both the demand and supply sides. All types of renewable energy sources are exploited to a maximum, as far as the integration of renewable energy sources into the changing energy supply system is feasible under the given structural, economic, and ecological constraints. The development of residential heating demand in Germany under the sustainability scenario reflects the fact that there is still a large potential for measures to increase energy efficiency in buildings (Krewitt et al. 2004). It is assumed that the building stock is renovated to a large extent by 2050, including the implementation of additional energy saving measures. As a result of such measures, the heating demand is reduced by nearly 50 % by 2050, particularly due to the decrease of demand for space heating. The resulting final energy demand for space- and service-water heating is shown in Fig. 3.5. The most obvious difference between the two scenarios is the drastically lower long-term energy demand in the sustainability scenario, which is lower by almost a factor of two. Particularly from 2030 onwards, buildings with very low specific-energy demand diffuse into the market.

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Reference Scenario Single-family house: not renovated Single-family house: new Apartment house: renovated Rest

Single-family house: renovated Apartment house: not renovated Apartment house: new

3000

Heating demand (PJ/a)

2500

2000

1500

1000

500

0

2000

2010

2020

2030

2040

2050

Sustainability Scenario Single-family house: not renovated Single-family house: new Apartment house: renovated Rest

Single-family house: renovated Apartment house: not renovated Apartment house: new

3000

Heating demand (PJ/a)

2500

2000

1500

1000

500

0

2000

2010

2020

2030

2040

2050

Fig. 3.5. Future development of space- and service-water heating demand for private households according to the reference and the sustainability scenario

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In both scenarios, the energy demand for single-family houses dominates. By 2050, this demand becomes equally distributed between on not renovated, renovated, and new houses. Another notably increasing segment is the smaller multi-family houses, whereas larger houses, or even multi-story buildings (see “Rest” in Fig. 3.5), require only 8 % of total 2000 heating demand, and even less in subsequent years. This points to the importance of developing micro cogeneration systems suited for singlefamily houses if larger market shares are to be harvested. 3.3.2 Future Heating Supply in the Residential Sector The next question arising is how this heating demand will be supplied. Based on the heating demand and the scenarios outlined above, Krewitt et al. (2004) specify a set of 25 reference applications, including a wide range of residential buildings (single-family houses and apartment buildings with various levels of energy demand, e. g. passive houses, low-energy houses, buildings with average heating demand, etc.); non-residential buildings like schools, hospitals and hotels; district heating networks with different consumer structures; and industry applications in the automotive and chemical industry. For each of these reference applications, detailed heat and electricity demand patterns are specified by using a CHP-planning software (BHKW-Plan 2003). Krewitt et al. (2004) then calculate the possible contribution of CHP to satisfy the heating demand (Fig. 3.6), with the constraint that in the sustainability scenario a CO2 reduction of 80 % should be achieved. This implies a large contribution of renewable energy carriers to total energy demand. x In the reference scenario, heating supply structure does not change radically. Conventional boilers still dominate the heat market in 2050, providing 69 % of space- and industrial-process heating. Heating from cogeneration even decreases slightly over the next decades, until it grows again after 2020, reaching a share of 13.5 % in 2050. As there is no ambitious greenhouse gas reduction target, renewable energy carriers only marginally contribute to the heating supply (<10 %). Corresponding to the more centralized structure of the reference scenario, most new power plants are large condensation power plants (almost 60 GWel) and large cogeneration power stations. x The sustainability scenario, on the other hand, is characterized by a significantly reduced energy demand and a rapidly increasing share of renewable energy sources (particularly biomass) and cogeneration. In the year 2050, the contribution of CHP systems to heating supply has

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increased from 12.3 % in 2000 to 25.5 %. In this scenario, a large part of the cogeneration heating supply is based on district heating systems. It was assumed that, until 2050, 50 % of the existing residential buildings, and even 60 % of the new buildings, are connected to a district heating network. This large share is based on analyses of the structural potential of district heating in Germany and the successful development of district heating in other countries, such as Denmark, the Netherlands and Austria. As a consequence, the amount of district heating supply increases in spite of the decreasing total heating demand. As the heating supply from small-scale CHP installations and renewable energy systems is also growing for individual heating systems, the share of conventional oil- or natural-gas-fired installations shrinks significantly after 2020 (Fig. 3.6). 7000

Reference scenario Sustainability scenario 6000

Final energy supply in PJ/a

Electricity 5000

4000

Oil, gas, coal (direct)

3000

Geothermal

2000

Solar collectors

Biomass (without CHP)

1000

Industrial CHP

Biomass CHP Object supply

(fossil)

District heating

(fossil)

(fossil)

0 2000

2000

2020

2020

2050

2050

Fig. 3.6. Development of heating supply in two scenarios (Source: Krewitt et al. 2004)

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700 Reference scenario Sustainability scenario

Geothermal Import of renewable energy

Gross power generation in TWh/a

600 Wind Hydro

500

Fossil CHP Nat. gas (cond.)

400

PV

300

Coal (cond.)

200

100

Nuclear

0 2000 2000

2020 2020

2050 2050

Fig. 3.7. Development of electricity supply in two scenarios (Source: Krewitt et al. 2004). Cond=condensation power station

Even though the heating demand in the reference scenario is much higher than in the sustainability scenario, the cogeneration share in the latter is significantly higher than in the reference case, because political support as well as infrastructural prerequisites (e. g., district heating systems) are assumed to be more favorable for CHP than in the reference scenario. According to the sustainability scenario, with its rather high share of district heating (Fig. 3.7), it is estimated that a micro cogeneration capacity of about 3.3 GWel could be installed in small domestic applications (Table 3.2). It has to be noted that this potential is based on the assumption that district heating will be spread widely. If such a high rate of district heating would turn out to be unfeasible due to barriers against the diffusion of district heating systems, such as low public acceptance or long implementation times, or if market actors such as gas distribution or appliance companies would strongly push domestic CHP systems, parts of the market segment for district heating could also be assumed by micro cogeneration.

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Table 3.2. Installed power of decentralized cogeneration systems (< 10 MWel) in Germany, in 2000 and in two scenarios in 2050 (Source: Krewitt et al. 2004) GWel

Micro cogeneration District heating Decentralised commercial and industrial CHP Total

2000

|0 1.2 2.7

Reference scenario 0.6 2.8 8.1

3.9

11.5

2050 Sustainability scenario 3.3 7.9 10.3

21.5

The following can be concluded from the foregoing scenario analysis: x In the reference scenario, the technical market potential for (micro) CHP is considerably smaller 0.6 GWel than in the sustainability scenario (3.3 GWel), despite the lower heating demand in the latter. Apparently, the climate and CHP policy of the country plays a fundamental role for the diffusion of (micro) CHP. x The technical market potential for micro cogeneration is relatively small compared to other CHP options, such as district heating and larger commercial or industrial CHP applications. Apparently, district heating is a more favorable option in many cases (see also Chap. 9). However, the split between micro cogeneration and district heating, as shown in Table 3.2, depends on several optimistic assumptions regarding the diffusion of district heat systems. In the sustainability scenario, very high penetration rates of district heating were assumed. If we assume that district heating does not develop so successfully, to a certain degree an additional part of this potential could be transferred to micro cogeneration. x Only the sustainability scenario meets the expectations of some micro cogeneration industries. Whereas, in the reference scenario, the longterm (2050) micro cogeneration potential of 0.6 GWel is significantly below the future sales envisaged by the micro cogeneration industry3, in the sustainability scenario, some 3.3 GWel of micro cogeneration systems would approximately meet the industries’ expectations. 3

For instance, Vaillant estimated in 2001 that, already by the year 2010, 100,000 units could be sold per year in Germany and 250,000/a in Europe, corresponding to approximately 0.5 GWel and 1.2 GWel, respectively. For European micro cogeneration, Frost & Sullivan forecast an installed total capacity of 3.5 GW in 2010.

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3.3 GWel corresponds to one million systems, taking an average system size of 3.3 kWel. If an increase to a yearly production rate of 50,000 systems within ten years were assumed for the German market, this market size would be reached in 2030. Thus, by 2030 the share of micro cogeneration would be about 50 times larger than today. x The contribution of micro cogeneration to overall electricity generation can be expected to be rather limited, even in the sustainability scenario. Assuming average full-load hours of 4000 h/a, 3.3 GWel would correspond to an electricity production rate of 13.2 TWh/a. This represents less than 3 % of the 2050 electricity demand in the sustainability scenario. x The share of renewable energy in the total heating and electricity supply portfolio is strongly determined by the climate policy of the respective country. If there are strong climate-protection goals, high shares of renewable energy carriers will be required to meet them, unless nuclear power and carbon capture and sequestration are options with a significant share. As long as micro cogeneration systems are not readily operationable with renewable fuels (see Sect. 9.4), this would inevitably imply competition between micro cogeneration and renewable energy carriers. x Nevertheless, even with high shares of renewable heating supply and reduced energy demand, there is ample potential for micro cogeneration in the sustainability scenario . The sustainability scenario clearly indicates that a reasonable and well balanced set of complementary measures – to simultaneously increase energy efficiency, the contribution of renewable energy sources, and the share of CHP in heating and electricity supply –may provide sufficient potential and suitable frame conditions for the application of innovative energy technologies.

4 Economics of Micro Cogeneration Lambert Schneider1

The prospects of a broad diffusion of innovative micro cogeneration technologies depend significantly on their economic performance. In this chapter, the economic viability of micro cogeneration will be assessed from three different perspectives: that of two potential micro cogeneration operators, property owners and vertically integrated utilities, as well as that of society in general. The operators’ perspective should demonstrate in which cases micro cogeneration plants could become an economically attractive alternative to other supply options and which micro cogeneration technologies appear to be particularly favourable under given market conditions. In the operators’ perspective, we will include all relevant taxes and subsidies and consider actual tariffs and regulations when calculating costs. The perspective of vertically integrated utilities appears especially appealing since a utility, which supplies natural gas and electricity, while at the same time being a distribution network operator (DNO), may have both synergies and conflicts of interest as regards the operation of micro cogeneration plants. With regard to the societal perspective, we want to establish whether and in which cases micro cogeneration can be an economically beneficial innovation for society. When calculating costs from the societal perspective, we will exclude all subsidies, taxes and levies. We do not consider external environmental costs in the calculations but we will analyze the range of greenhouse gas abatement costs to economically quantify the benefits for the environment. In all perspectives, the economic performance of micro cogeneration is determined for Germany. Evaluation of the economic performance of micro cogeneration is undertaken quantitatively for a number of micro cogeneration technologies in different representative buildings under economic conditions in Germany. The economic performance is then compared to other heat and electricity supply scenarios. 1

The author would like to acknowledge valuable support from Sabine Poetzsch (Öko-Institut), Jens Gröger (Deutsche Energieagentur) and Lars Winkelmann (Berliner Energieagentur GmbH)

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4.1 Micro Cogeneration Technologies The economic performance of micro cogeneration plants is assessed with regard to a number of representative micro cogeneration technologies which are also used for the ecological assessment in Chap. 5 (see Sect. 5.1), allowing a direct comparison of the economic and ecological performance of these technologies. The selected technologies represent micro cogeneration plants which are either already available on the market or are at an advanced stage of development and are expected to be brought onto the market round about by 2005. Due to the high capital costs of fuel cells and the considerable uncertainty surrounding their achievable target costs (Krewitt et al. 2004), we do not include fuel cells in the comparison of economic performance. Reciprocating engines with an electrical capacity of about 5 kW and upwards have been available for many years. The Dachs by Senertec is the market leader in micro cogeneration plants in Germany with 10,000 engines having been produced by October 2004 (see Sect. 3.1). Technologies 3, 4, and 5 in Table 4.1 correspond to different versions of the Dachs. The Ecopower by Power Plus Technologies is also a reciprocating engine and corresponds to technology 2 in Table 4.1. Some companies are currently developing smaller reciprocating engines. Since 2003, Osaka Gas in Japan has been marketing a reciprocating engine from Honda with an electrical capacity of 1 kW. The engine is sold together with a boiler and a heat storage tank for about € 5,500 in Japan but is not yet available in Europe. The package costs in Japan are used as the basis for the 1 kWel reciprocating engine, technology 1, in Table 4.1. Stirling engines are being developed by a number of companies (see Sect. 1.2.2). Several companies (e.g. Enatec, Powerbloc, WhisperTech, MicroGen) are focused on developing engines with a capacity of about 1 kWel, since this size is well-suited to single-family houses. The Whispergen, developed by WhisperTech, is likely to be the first plant of this size to be brought onto the market in 2005. After the completion of field tests in the UK, the British E.ON company Powergen ordered 80,000 WhisperGen units which will be sold for about £ 3,000 in the UK.2 The WhisperGen is used for specifying reference technology 6. Reference technology 7 corresponds to a somewhat larger Stirling engine of 3 kWel, which is currently being developed by Mayer & Cie. Purchase costs for 2004 are quoted at € 13,000 (ASUE 2004). Reference technology 8 refers to a Stirling engine of 9 kWel that has been developed by the company Solo. About 40 plants 2

Press release by Powergen from 16 August 2004

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Table 4.1. Technical parameters and estimated costs of selected micro cogeneration technologies (for emission factors see also Table 5.1) Reciprocating engines 1

2

3

4

Stirling engines 5

6

7

8

Capacity Electric

[kW]

1.0

4.7

5.5

5.5

5.0

0.8

3.0

9.5

Thermal

[kW]

3.3

12.5

13.9

14.9

12.6

8.0

15.0

26.0

Efficiency Electric

-

20%

25%

25%

25%

25%

10%

15%

24%

Total

-

85%

88%

88%

93%

88%

85%

90%

96%

Investment costs CHP module

[€]

5,700 13,200 13,300 14,500 14,400

4,300 13,300 25,900

Other

[€]

1,000

3,700

3,700

3,700

3,700

1,200

3,400

5,300

50

36

26

26

26

20

15

10

Maintenance costs Economic lifetime

€/MWhel [h]

20,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000

have been sold so far. Purchase costs for 2003 are quoted at € 24,900 (ASUE 2003).3 Since the size and performance of these technologies vary, it should be noted that they are not directly comparable. In addition, some cost estimates or parameters are still associated with uncertainty. The results of the analysis can therefore only be indicative; but they do provide an initial assessment of the economic performance of different micro cogeneration technologies. Table 4.1 summarizes the economic parameters for the reference technologies. The price basis of cost estimates is 2005.

4.2 Reference Buildings Micro cogeneration technologies can be installed in different residential or commercial properties. The economic performance of the plants not only depends on investment, operation and fuel costs but also on the heat and electricity demand characteristics of the buildings. To reflect differences in heating and electricity demand, the economic performance of the eight reference technologies is assessed in five different buildings which represent typical potential applications in Germany. 3

Currently, the Solo engine is slightly subsidized by the company but short-term target costs are around € 24,000.

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Table 4.2. Characteristics of reference buildings for the economic assessment of micro cogeneration plants Single-family houses Heat demand

Low

Average

Apartment houses Low

Hotel

Average

Heating surface

[m²]

131

112

457

913

1,263

Heating load

[kW]

7

11

23

67

75

Heating demand

[MWh/a]

9

16

29

109

84

Hot water demand

[MWh/a]

2

3

12

19

38

Electricity demand

[MWh/a]

4

3

13

27

49

We consider two single-family houses, two apartment buildings, and a hotel. The heat demand characteristics of these buildings are taken from a CHP simulation tool (ZSW 2000). The electricity demand is based on a representative survey of households in Germany (FHG-ISI et al. 2004). Key parameters of the five buildings are illustrated in Table 4.2. In Germany, the conditions for electricity supply from micro cogeneration plants have changed considerably with the liberalization of the electricity market. All electricity consumers, including buildings which are supplied with micro cogeneration plants, may choose their electricity supplier. In the case of single-family houses, micro cogeneration plants usually supply electricity and heat to the property owners who have chosen to install them. However, in apartment buildings an operator of a micro cogeneration plant cannot force the tenants to purchase electricity from the micro cogeneration plant. If a tenant prefers to be supplied with electricity from another supply company, the micro cogeneration plant operator is forced either to produce less electricity or to feed additional electricity into the grid. Feeding electricity into the grid or selling electricity to consumers elsewhere are both less attractive in economic terms. For micro cogeneration operators in properties with several parties, therefore, it is a key prerequisite that a large amount of the generated electricity be sold to consumers directly at the production site. Some operators of micro cogeneration plants offer a discount of 5 to 10 % in relation to the electricity price of the local utility to their consumers in apartment buildings. In practice, this incentive has proven to be sufficient for operators under Third Party Financing arrangements to be able to supply about 80 to 90 % of electricity consumers in apartment buildings. Where several parties are supplied by one operator, we calculate the economic performance on the assumption that only 80 % of the parties are supplied with electricity from a micro cogeneration plant.

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In the absence of CHP, heat is usually provided by gas- or oil-fired boilers. In the case of apartment buildings, heat may be generated by a central boiler, which distributes heat to all apartments, or by small boilers for each apartment. In Germany, most apartment buildings are equipped with a central boiler. In this case, the boiler could be replaced or supplemented by a micro cogeneration plant operated by the owner of the building or a third party. Supplying single apartments in apartment buildings with micro cogeneration is more difficult. In principle, Stirling engines of about 1 kWel could be used in individual apartments instead of boilers since they run rather noiselessly and are not expected to require frequent maintenance. However, in practice, the deployment of micro cogeneration in individual apartments would be difficult for two main reasons: Firstly, connecting a micro cogeneration plant would require modification of the electricity connection. Secondly, most apartments in Germany are rented and property owners do not have economic incentives to invest in micro cogeneration since they do not profit from saved energy costs and can only recoup investment costs to a limited extent via increased rents. In the context of energy-saving measures for buildings, this problem is broadly known and also referred to as the user-investor dilemma. As a result, we only consider centralized heat supply by a single boiler in the case of apartment buildings.

4.3 Heat and Electricity Supply Scenarios In order to compare the economic performance of micro cogeneration with other supply options, we consider three different scenarios for supplying heat and electricity to the five buildings described above: x In the reference case, electricity is purchased from a utility and heat is generated with a condensing boiler. The boiler is assumed to operate with an average seasonal efficiency of 97 % based on the net calorific value. x In the micro cogeneration scenario, the buildings are supplied with heat and electricity by different micro cogeneration plants. Where necessary, an additional boiler covers peak load. Additional electricity is purchased from a utility and, since electricity generation is at times larger than electricity demand, a portion of the electricity generated by the micro cogeneration plant is fed into the grid. x In an additional scenario, several buildings are jointly supplied with heat and electricity by a small heat and electricity network with CHP. In this

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case, a CHP plant (with an electrical capacity of about 10 to 50 kW) and an additional boiler supply heat to a small district heating network and provide electricity to consumers in the area through its own small electricity grid. As in the case of micro cogeneration plants in apartment buildings, it is assumed that only 80 % of the consumers within the supplied area would prefer to purchase electricity from the operator of the micro cogeneration plant. In practice, the size of such grids varies and depends mainly on the willingness of property owners to participate in such a system. For this analysis it is assumed that the grid encompasses one block. Based on the settlement structure of large German cities, we estimate 15 single-family houses or 21 apartment buildings to be typical block sizes.

4.4 Economic Parameters The costs of the different supply options are calculated at 2005 prices without VAT. Inflation is assumed to be 2 % per year. Levelized supply costs are calculated with a model. The time horizon is 10 years: from 2005 to 2014. If the technical lifetime of components (boiler, district heat grids) is longer than 10 years, a salvage value is taken into account which is based on linear depreciation over the technical lifetime. The nominal rate of return for capital is 8 % in calculations from an operator’s perspective and 5 % in calculations from a societal perspective. 4.4.1 Energy Prices and Subsidies Future prices and costs for electricity and natural gas are estimated in own scenarios. Electricity prices are based on Eurostat price statistics for different consumption quantities (European Commission 2005a), forward prices at the German power exchange (EEX) and projections for other components of electricity prices, including grid tariffs, the concession levy, and the renewable energy and CHP levies (European Commission 2003; Schlesinger et al. 2000; Deutscher Bundestag 2002; Krzikalla and Schrader 2002). The German concession levy is imposed by the local governments for the use of public grounds. The renewable energy and CHP levies are imposed on consumers for the costs of the renewable energy law and the CHP law (see Chap. 8).

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Table 4.3. Average nominal prices and costs for electricity (low voltage) and natural gas, without VAT in €ct/kWh 2005

2010

2015

2020

Electricity consumer prices (incl. electricity tax and levies) Households (3 MWh/a)

17.2

18.2

19.8

21.8

Commercial users (70 MWh/a)

12.9

13.4

14.5

15.9

Feed-in (CHP bonus until 2014)

8.7

9.2

4.9

5,6

Households (3 MWh/a)

11.8

12.5

14.1

15.8

Commercial users (70 MWh/a)

10.1

10.8

12.1

13.7

Consumers with 50 MWh/a

3.7

4.1

4.6

5.1

Consumers with 300 MWh/a

3.4

3.7

4.1

4.6

Consumers with 1,200 MWh/a

3.2

3.6

4.0

4.4

Consumers with 50 MWh/a

2.9

3.3

3.7

4.3

Consumers with 300 MWh/a

2.5

2.9

3.3

3.8

Consumers with 1,200 MWh/a

2.5

2.8

3.2

3.6

Electricity supply costs (w/o taxes and levies)

Natural gas consumer prices (incl. gas tax and concession levy)

Natural gas supply costs (w/o gas tax and concession levy)

Natural gas price projections are based on Eurostat statistics (European Commission 2005b), past border prices (BMWA 2005) and projections (Schlesinger et al. 2000; Deutscher Bundestag 2002). Table 4.3 illustrates the assumptions for prices and costs for electricity and natural gas. The operation of micro cogeneration plants is promoted by legislation in Germany (see Sect. 8.1.3) with the most important effects being: x exemption from electricity tax for power plants with an electrical capacity below 2 MW, x exemption from natural gas tax for CHP plants with an average energy efficiency above 70 %, and x payment of a bonus of 5.11 €ct/kWh for electricity fed into the grid from small CHP plants commissioned before 2009.

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This legislation is considered in the economic analysis of independent operators and vertically integrated utilities. In the societal analysis, the costs of the different supply options are assessed without consideration of natural gas and electricity taxation, the concession levy, the renewable energy and CHP levy, or the CHP bonus. 4.4.2 Economic Losses or Benefits for Distribution Network Operators A broader diffusion of micro cogeneration can result in economic benefits for the electricity network, including savings on transmission and distribution losses, the deferral of upgrades of the electricity network, or the removal of local bottlenecks in the distribution system. The economic benefits or costs for the electricity network depend on the penetration of distributed generation. With low and moderate use of distributed generation, costs can be saved while with very high penetration the network may even need to be reinforced if significant quantities of electricity are fed to the higher voltage level (see Chap. 9 for more details). Since power from micro cogeneration is mostly consumed on-site and rarely fed into the medium voltage level, it can be expected that micro cogeneration will have economic benefits for the electricity network. Certainly, these benefits are as yet difficult to quantify. As a conservative (i.e., lower-end) assumption, we estimate that overall transmission and distribution costs in a network would be reduced by about 10 % if 30 % of low-voltage power were to be generated by micro cogeneration or other distributed generation. We consider this economic benefit in calculations made from the perspective of integrated utilities and from a societal perspective. From the perspective of independent plant operators, we make calculations using existing tariffs in Germany and include the CHP bonus (see Table 4.3.). 4.4.3 Economic Perspectives of Different Operators Next to these grid effects, there are several other costs or economic benefits that depend on the type of plant operator. We consider three different potential operators of micro cogeneration plants to be particularly important: Property owners, energy service companies, and vertically integrated utilities. x The property owner owns a plant, purchases natural gas and additional electricity, and usually contracts a company for regular maintenance of

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the plant. As the plant operator, the owner both bears most economic risks and profits from economic benefits. x Energy service companies can provide several types of Third Party Financing services. In cases involving small CHP plants, they usually install, own, and operate the plant and sell heat and electricity to consumers. Heat and electricity prices are agreed upon in a service contract with the property owner. In cases with several electricity consumers, the energy service company also establishes electricity supply contracts with each consumer. Thus, the energy service company both bears most economic risks and profits from economic benefits. x Energy supply utilities can provide services similar to those of energy service companies. For example, a service contract may include the following constellation: The property owner purchases a plant from the utility. The utility installs the plant, conducts regular maintenance at a fixed cost, sells natural gas and additional electricity to the property owner, and offers a special rate for electricity fed into the grid and the purchase of electricity. A vertically integrated utility may also connect micro cogeneration plants to a virtual power plant, increasing the value of electricity generation. In this scenario, the property owner and the utility share economic risks and benefits. This constellation may be particularly attractive for vertically integrated utilities that are simultaneously electricity and gas suppliers and network operators. Table 4.4 summarizes the economic benefits and barriers for different operators. Energy service companies and utilities can often purchase natural gas and additional electricity at lower costs compared to property owners and consumers. In addition, they can use synergies and gain cost reductions by purchasing, installing, operating, and maintaining many plants. However, energy service companies may run into difficulties when implementing Third Party Financing models since the property rights and access to the micro cogeneration plant have to be registered as easement in land registers. For small micro cogeneration plants, this might be a prohibitive barrier since transaction costs are high and many property owners dislike the idea of such easements being associated with their properties. Thus, it appears more likely that small micro cogeneration plants will be owned by the property owners while they may be installed and/or operated by energy service companies or utilities. Vertically integrated utilities could benefit from closer consumer relations. Consumers with a micro cogeneration plant may prefer longterm contracts for electricity and natural gas supply and tariffs for electricity fed into the grid. Vertically integrated utilities may also gain additional economic benefits if many micro cogeneration plants are

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integrated into a virtual power plant, enabling utilities to shape power generation and reduce grid congestion (see Chap. 9). In addition, they could increase their natural gas sales. On the other hand, on-site electricity generation by micro cogeneration plants reduces the quantity of electricity distributed and thus the revenues from grid charges. A key question is whether distribution network operators will be allowed to pass on the loss of revenues from network charges for distribution to all consumers. If not, they have strong incentives to generally discourage distributed generation. Table 4.4. Benefits and barriers for different operators of micro cogeneration plants Property owner

Energy service company

Vertically integrated utility

Natural gas purchase conditions

O

+

+

Provision of additional electricity

O

+

+

Plant purchase and installation

O

+

+

Plant maintenance

O

+

+

Contracts and legal issues

+

-

O

Network charges

+

+

-/O

Ancillary network services (e.g. O O + load shaping, minutes reserve, etc.) “+“ = advantageous conditions, “O” = neutral, “-” = disadvantageous conditions

The potential economic benefits for a vertically integrated utility are as yet difficult to quantify. In our economic analysis, we assume that a vertically integrated utility has economic benefits from additional sales of natural gas and better consumer relations which equal a 5 % reduction on natural gas prices. In addition, we estimate a net benefit of 0.5 €ct/kWh electricity generation if all micro cogeneration plants are connected to a virtual power plant.4

4

Note that a virtual power plant involves considerable costs (e.g. for information technology) and that 0.5 €ct/kWh is understood as a net benefit.

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4.5 Micro Cogeneration Electricity Generation Costs In this section, electricity generation costs of micro cogeneration plants are determined independently of the heat and electricity supply characteristics of the buildings referred to above. Electricity generation costs are calculated for two cases: Operation with a supplementary boiler and standalone operation. A supplementary boiler is regularly installed since it is economically more advantageous for supplying peak heat demand. This allows costsaving through the installation of a smaller CHP unit which can then operate more continuously. In addition, a supplementary boiler can provide heat during maintenance or failure of the CHP plant. For small micro cogeneration plants, stand-alone operation may also be feasible, given that the costs of small supplementary boilers are relatively high. However, in such cases, the operation time of micro cogeneration plants is limited by the heat demand characteristics of the building. Weather conditions and typical building standards in Germany imply a maximum full load operation time of about 1,500 to 2,000 hours per year for stand-alone operation. Electricity generation costs are calculated by adding up levelized investment, maintenance, and fuel costs, and subtracting a credit for avoided heat generation costs. Where the CHP plant is operated with an additional boiler, only marginal fuel costs of heat generation are avoided. With stand-alone operation, the micro cogeneration plant replaces the boiler, and thus avoids full heat generation costs, including investment, maintenance, and fuel costs of the boiler. Fig. 4.1 shows levelized electricity generation costs against full load operation hours for a number of micro cogeneration plants for the two cases: stand-alone operation and operation with a supplementary boiler. The figure reveals several interesting results: x Small micro cogeneration plants for single-family houses (about 1 kWel) are only economically feasible in stand-alone operation. If operated with an additional boiler, electricity generation costs are significantly higher than electricity purchase costs for households. In contrast, in stand-alone operation, electricity generation costs become lower than electricity purchase costs from about 1,000 full load operation hours onwards. Thus, although the heat demand limits standalone operation to about 1,500 to 2,000 hours per year, the stand-alone operation of micro cogeneration is economically feasible.

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35 Stirling 3 kW

Electricity generation costs (€ Cent / kWh)

30 25

Stirling 0.8 kW

20 Marginal purchase costs for households

15

Stirling 9 kW

10

Refund for electricity fed into the grid

5 Reciprocating 5 kW 0 0

1000

2000

3000

4000

5000

6000

7000

8000

Full load operation hours (h/a)

Fig. 4.1. Levelized electricity generation costs (2005 prices without VAT) of different micro cogeneration plants for stand-alone operation (grey lines) and operation with a supplementary boiler (black lines)

x Micro cogeneration plants for apartment buildings are only economically viable if operated with a supplementary boiler and for at least 5,000 hours or so. Different from micro cogeneration plants for single-family houses, all larger engines have electricity generation costs far above electricity prices if operated as stand-alone plants for only 1,500 to 2,000 hours per year. With a supplementary boiler, most plants are economically feasible if they provide electricity to on-site consumers for at least 3,500 to 4,000 full load operating hours. Since up to 30 % of the generated electricity is typically fed into the grid, a full load operation time of about 5,000 hours ensures an economically attractive operation in most cases. x Sufficient on-site electricity demand is a prerequisite for economic operation. It is not economically feasible to install micro cogeneration plants with the purpose of feeding electricity into the grid, since the total return – including a bonus payment according to CHP law in Germany – is lower than the electricity generation costs in most cases. Consequently, the availability of a sufficient quantity of electricity consumers at micro cogeneration plant sites is a prerequisite for their diffusion. This certainly limits the potential for micro cogeneration.

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Marginal electricity generation costs €Ct / kWh

Marginal costs without taxation Marginal costs with existing natural gas taxation

12 10

-3.9 €Ct/kWh (-45%)

-2.6 €Ct/kWh (-44%)

-1.3 €Ct/kWh (-19%)

-1.6 €Ct/kWh (-37%)

Stirling 0.8 kW

Stirling 3 kW

Reciprocating 5 kW

Stirling 9 kW

8 6 4 2 0

Fig. 4.2. Marginal electricity generation costs of different micro cogeneration plants with and without natural gas taxation (nominal prices in 2005)

The1 kWel reciprocating engine is not included in Fig. 4.1 since electricity generation costs are rather high (about 40 €ct/kWh). This is mainly due to considerable investment and operation costs. It should also be noted that the stand-alone operation of Stirling engines may be more reliable than with reciprocating engines. If the motor of a stand-alone operated reciprocating engine fails, heat supply is disrupted. Repairing the engine in case of failure or regular maintenance activities may take some time, involving a supply risk, particularly in winter. With Stirling engines, heat is generated external to the engine. Some Stirling engines are designed in a manner that allows continued heat supply in case of failure in the Stirling process. Natural gas taxation presents another important factor influencing electricity generation costs. In Germany, efficient CHP plants are exempt from natural gas taxation, while fuel combustion in boilers is currently subject to a tax of 0.55 €ct/kWh natural gas (see Sect. 8.1.2). Fig. 4.2 shows that the effect of the natural gas taxation on marginal electricity generation costs is noteworthy. The tax on natural gas fired in boilers increases the credit for avoided heat generation costs. As a result, marginal electricity generation costs of the selected technologies decrease by 1.3 3.9 €ct/kWh electricity or by 19 to 45 % respectively. Fig. 4.2 also illustrates that the taxation effect differs considerably according to CHP technology. The effect is greatest in the case of the 0.8 kWel Stirling engine (technology 6) due to the high ratio of heat production (and thus avoided tax) relative to electricity generation. Thus, the low electrical efficiency of

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about 10 % is an advantage in terms of natural gas taxation. However, this taxation effect is not backed by the environmental performance of such CHP plants, since plants with lower electric efficiency have poorer environmental performance (see Chap. 5). In this light, it may be necessary to reconsider the criteria for natural gas tax exemption in Germany.

4.6 Economic Performance of Micro Cogeneration in Different Buildings The economic performance of the selected micro cogeneration technologies (Table 4.1.) in the reference buildings (Table 4.2) is determined by simulating operation of the micro cogeneration plants, taking into account the actual heat and electricity demand characteristics of the buildings. The simulation is conducted with the tool “BHKW Plan”, developed by ZSW (2000). It is assumed that micro cogeneration plants mainly follow heat demand and that surplus electricity is fed into the grid. This way of operation is economically viable in Germany because marginal electricity generation costs are usually lower than the refund for electricity fed into the grid. However, this applies only for plants that are eligible for the German CHP bonus of 5.11 €ct/kWh. According to current legislation in Germany, the CHP bonus will only be paid for plants that are commissioned before 2009. The simulation delivers electricity and heat generation quantities for the micro cogeneration plants as well as the share of generated electricity that is used in each building and the share that is fed into the grid. The economic performance of different supply cases is assessed by comparing total costs for heat and electricity supply for each building. Total supply costs are calculated by levelizing all costs (investment, operation, fuel and electricity purchase) and all revenues (electricity fed into the grid) over a period of ten years. 4.6.1 Independent Operators’ Perspective Fig. 4.3 illustrates the economic performance from the perspective of independent operators for the three supply scenarios: the reference scenario, the micro cogeneration scenario, and the small district heat scenario (see Sect. 4.3). The economic performance is illustrated as total heat and electricity supply costs relative to the reference scenario. For the micro cogeneration scenario, Fig. 4.3 shows the economically most favourable micro cogeneration plant (referred to as “best plant”).

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Reference scenario

140%

Micro cogeneration scenario (best plant)

130%

Small DH scenario

120% 110% 100% 90% 80% 70% 60% Single-family Single-family house house (low heat (avg. heat demand) demand)

Apartment building (low heat demand)

Apartment building (avg. heat demand)

Hotel

Fig. 4.3. Heat and electricity supply costs for the reference buildings from the independent operators’ perspective

For the single-family house with low heat demand, the 0.8 kWel Stirling engine (reference technology 6) is the economically most attractive option for several reasons. Firstly, a supplementary boiler next to the micro cogeneration plant is not required in such a building, since the heat output of the micro cogeneration plant is sufficient to cover the maximum heat demand. Secondly, the investment costs of about € 4,300 for the CHP plant are relatively low. Finally, the relatively low electrical efficiency of 10 % is not disadvantageous in economic terms since it better reflects the ratio of heat and electricity demand in single-family houses. The low electrical efficiency leads also to significant tax advantages (see above). In the case of the single-family house with an average heat demand, the micro cogeneration plants considered are not economically attractive. The 1 kWel reciprocating engine (reference technology 1) has relatively high investment costs and the 0.8 kWel Stirling engine (reference technology 6) would make it necessary to install a small supplementary boiler to cover the peak heat demand, involving significant additional costs. Other micro cogeneration plants with sufficient heat capacity and reasonable investment costs may be economically viable for this building type. For apartment buildings, both micro cogeneration and small district heat with CHP are more attractive than the reference case, particularly in cases of apartment buildings with average heat demand. For small district heat networks, the heat supply infrastructure is the most important cost factor.

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Therefore, such small heat networks are only economically attractive in areas with a sufficiently high density of heat demand. This applies to blocks of apartment buildings in cities but not to areas with dispersed single-family houses. The main advantages of small grids are the significant cost reductions brought about by electricity generation with reciprocating engines. For example, specific investment and maintenance costs of small reciprocating engines with a capacity below 10 kWel are about twice as high as those of engines with a capacity of 30 to 50 kWel. In addition, operators of small district heat networks benefit from purchase costs for additional electricity being considerably lower than regular electricity prices for households. Furthermore, both micro cogeneration and small district heat networks profit from their exemption from natural gas and electricity taxation as well as from the CHP bonus. In the case of the hotel, the economic performance of micro cogeneration is similar to the reference scenario, despite rather favorable heat and electricity demand characteristics for cogeneration. The main reason for micro cogeneration not being as attractive in economic terms is that electricity prices for the hotel are already considerably lower than for households. 4.6.2 Perspective of Vertically Integrated Utilities Total heat and electricity supply costs from the perspective of vertically integrated utilities are illustrated in Fig. 4.4. The figure shows that both micro cogeneration and small district heat systems are less attractive for vertically integrated utilities than for independent operators. The loss of revenues from network charges is greater than the estimated benefits in terms of long-term cost savings in the electricity grid, increased natural gas sales (estimated at a 5 % lower price), and economic benefits from connecting micro cogeneration plants in a virtual power plant (estimated at 0.5 €ct/kWh). This result even holds if economic performance is calculated with a natural gas price that is 10% lower and if benefits from the interconnection of micro cogeneration plants are estimated at 1 €ct/kWh. Consequently, a key question is whether and to what extent distribution network operators may pass on the loss of revenues from network charges to all consumers. Regulation plays an important role here. Only if distribution network operators are adequately compensated for these losses, will they develop initiatives to make use of the potential benefits from distributing micro cogeneration plants. Adequate compensation could also help to overcome the current policy of some distribution network operators of impeding the connection of CHP plants (see Chap. 8).

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Reference scenario

140%

Micro cogeneration scenario (best plant)

130%

Small DH scenario

120% 110% 100% 90% 80% 70% 60% Single-family Single-family house house (low heat (avg. heat demand) demand)

Apartment building (low heat demand)

Apartment building (avg. heat demand)

Hotel

Fig. 4.4. Heat and electricity supply costs for the reference buildings from the perspective of vertically integrated utilities

4.6.3 Societal Perspective Fig. 4.5 compares heat and electricity supply costs from a societal perspective. Taxes (natural gas, electricity), levies (concession levy, renewable energy levy, CHP levy) and subsidies (CHP bonus) are not included. Please note that external environmental costs are not considered either. From a societal perspective, micro cogeneration does not yet have cost advantages compared to the reference scenario. For the single-family house with a low heat demand and the apartment building with an average heat demand, the costs of the Stirling engine of 0.8 kWel (reference technology 6) are comparable to the costs in the reference scenario. This plant is also the most attractive micro cogeneration technology in economical terms for other buildings. However, it shows a less favourable environmental performance: GHG emissions are about 11 % higher than in the reference scenario, where electricity would be generated by a natural gas combined cycle power plant (see Chap. 5). Consequently, the relatively good economical performance of this micro cogeneration technology is clouded by a relatively poor environmental performance compared to other micro cogeneration technologies.

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Reference scenario

140%

Micro cogeneration scenario (best plant)

130%

Small DH scenario

120% 110% 100% 90% 80% 70% 60% Single-family Single-family house house (low heat (avg. heat demand) demand)

Apartment building (low heat demand)

Apartment building (avg. heat demand)

Hotel

Fig. 4.5. Heat and electricity supply costs for the reference buildings from a societal perspective (without taxes, levies and subsidies)

Other micro cogeneration technologies are significantly less attractive from the societal perspective. This is illustrated in Fig. 4.6 where the economic performance of different micro cogeneration technologies in the apartment building with an average heat demand is compared. Reference technologies 2 to 8 are all favourable for an independent operator but face additional costs from a societal perspective, leading to GHG abatement costs in the range of 100 to 250 €/t CO2 equivalent. Similar results apply to other building types. Thus, it is important to take the environmental performance into account when assessing the economic attractiveness from a societal perspective. Currently, micro cogeneration technologies still lack either economic attractiveness or good environmental performance. Low investment costs are traded-off with a less favourable environmental performance. In the further development of micro cogeneration technologies, a key challenge will be to improve electric and total efficiency without increasing unit costs. Very small district heat systems with CHP are also not yet attractive from a societal perspective. However, larger district heating systems can be expected to have an economically better performance, mainly as a result of larger CHP plants having lower investment costs and electric efficiency being greater while heat losses in the distribution system do not substantially increase.

4 Economics of Micro Cogeneration

120% 110%

85

Reference scenario Stirling 0.8 kW Stirling 3 kW Reciprocating 5 kW Stirling 9.5 kW

100% 90% 80% 70% 60% Independent operator

Societal perspective

Fig. 4.6. Economic comparison of different CHP technologies in the apartment building with an average heat demand

4.7 Conclusions Micro cogeneration is becoming an economically attractive option for consumers. Reciprocating engines of about 5 kWel are already on the market and are economically feasible in larger apartment buildings with a sufficient heat and electricity demand. For single-family houses, systems of about 1 kWel that fully substitute the boiler appear particularly advantageous in economic terms. Thus, for the market of single-family houses it is an important prerequisite that engines are designed to cover typical heat loads in the range of 10 kW at reasonable costs. The economic attractiveness of micro cogeneration for consumers largely rests on a number of regulatory advantages. These include the exemption from electricity and natural gas taxation, the payment of a CHP bonus for electricity fed into the grid and the avoidance of concession levies and grid charges for electricity generated on-site. However, the picture is quite different if these effects are excluded from economic calculations: From a societal perspective, as long as external costs are not included in the calculation, none of the analyzed micro cogeneration technologies is yet economically viable when taxes, levies and subsidies are not considered. In contrast, heat and electricity supply costs are

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substantially higher for most technologies compared to heat supply by a boiler and electricity purchase from a utility. Investment costs need to decrease further to make micro cogeneration a viable option from this perspective. Sensitivity analyses show that these results hold with varying energy prices, e.g. with natural gas prices being 20 % higher or lower and electricity prices being 10 % higher or lower. With current micro cogeneration technologies, there is also a trade-off between environmental and economic performance. For example, the Stirling engine with a capacity of 0.8 kWel has a rather good economic performance but a relatively low efficiency, resulting in higher GHG emissions compared to a condensing boiler and electricity generation in a natural gas combined cycle power plant. The economic feasibility of micro cogeneration also depends on the type of operator. Vertically integrated utilities may benefit from closer costumer relations, increased natural gas sales and the provision of network services by integrating many plants into a virtual power plant. However, they may also face a loss of revenues of network charges which may not be compensated by long-term cost savings in the network due to micro cogeneration. A key question is whether distribution network operators may pass on these losses of revenues to other consumers, thereby increasing the average grid charges. If so, micro cogeneration plants may be an interesting option for vertically integrated utilities. Otherwise, the loss of revenues from grid charges is likely greater than the economic profit from other benefits and, consequently, distribution network operators would have economic incentives to impede the diffusion of micro cogeneration. Small district heat networks are an economically viable alternative to micro cogeneration in areas with higher heat densities (i.e. apartment buildings). In such areas, micro cogeneration or small district heat networks can realize significant overall cost reductions (>10 %) compared to the separate supply of heat and electricity. However, from a societal perspective, without including external costs in the calculation, this supply option is also not economically attractive. Larger district heat systems may be more favorable in areas with higher heat demand, since relative investment costs for CHP plants are lower, while electric efficiency is significantly higher and distribution losses do not substantially increase. In summary, micro cogeneration is not yet but could become an economically and environmentally attractive option in areas with low heat density. For its diffusion, reasonable investment costs are a key prerequisite. From a societal perspective, high efficiencies are important to achieve emission reductions at a reasonable cost.

5 Environmental Impacts of Micro Cogeneration Martin Pehnt, Corinna Fischer1

During the past decades, many efforts have been made to improve the environmental performance of energy conversion systems. One of the most prominent examples is the reduction of sulfur dioxide emissions through flue gas desulfurization. Other environmental impacts have also been reduced in the course of implementing modern power plant technologies, power plant modernization or restructuring, and switching fuels. Nevertheless, the increasing demand for services, mobility, light, communication, and heating is still responsible for significant environmentally damaging effects, which are caused throughout the whole energy conversion life-cycle: from primary fuel extraction, through processing, distribution and conversion into electricity or heat, to energy delivery and use. The related impacts, such as oil tanker spills, the accumulation of radioactive waste, the emission of hazardous substances, and the use of non-renewable energy resources, continue to damage our environment. Among the most challenging issues today is the anthropogenic emission of greenhouse gases. The scientific community acknowledges that farreaching measures have to be taken to reduce the increase in CO2 concentration in the atmosphere, in particular with regard to energy use. However, even the unambitious goals of the Kyoto protocol for the reduction of greenhouse gas emissions will not be met by many countries worldwide. It has often been argued that, due to its decentralized nature and high total efficiencies, cogeneration, and ultimately also micro cogeneration, contributes toward environmental relief. The present chapter evaluates this assumption and investigates the potential environmental effects of a diffusion of micro cogeneration on the following levels: 1. Foremost, the direct impacts of power plant operation. This concerns, for example, the emission of pollutants or climate-altering gases –

1

CF: Section 5.3.3

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which depends significantly on the efficiency of fuel conversion –, the use of lubricants or other auxiliary materials and the like. 2. The upstream environmental impacts of fuel supply, e.g. the extraction, processing, and transport of gas or other fuels required for the operation of the system. In cases where micro cogeneration systems have lower fuel demand than competing technologies, the upstream impacts may be smaller as well. 3. The environmental impacts of power plant manufacturing and construction. Typically, due to the long life span of the systems, power plant production is of lower importance than the other life cycle stages, unless some very environmentally detrimental materials are used (Pehnt 2002). 4. The impacts of electricity and heat distribution. The transport of electricity (in electricity grids) and of heat (e.g. in district heating systems) inevitably leads to loss (see Sect. 5.3.1), which can be partially avoided through local production of electricity. 5. Connecting micro cogeneration plants to “virtual power plants” by means of communication devices. This could either create further environmental impacts or reduce them. 6. Indirect environmental impacts, which could be created due to the immediate influence of decentralized systems on customer behavior.

5.1 Life Cycle Assessment of Micro Cogeneration To assess the issues raised in items 1 through 4 for the case of micro cogeneration, and to compare it to competing energy supply technologies, we use the methodology of life cycle assessment (LCA). The two key elements of LCA are x assessment of the total life-cycle (“cradle-to-grave approach”) of a given energy conversion technology, including the exploration, processing, transport of materials and fuels, the production and operation of the investigated energy conversion units, and their disposal/recycling, and x assessment of different environmental impacts on resources, human health, and ecosystems. An LCA basically consists of four steps: firstly, a goal and scope definition serves to describe the investigated product, the data sources and system boundaries, while defining the functional unit, i.e. the reference for all related in- and outputs. This functional unit could be, for instance, the

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provision of one kilowatt-hour electricity to the customer or the supply of a hotel with heat and electricity for one year. Secondly, an inventory analysis “involves a data collection and calculation procedure to quantify relevant inputs and outputs” (ISO 1997). Thirdly, the potential impacts of the in- and outputs of the inventory analysis are determined by an impact assessment, which categorizes and aggregates the environmental interventions. For that purpose, impact categories, such as global warming, eutrophication, acidification, or summer smog are defined and characterization factors calculated which describe the contribution of different substances to that particular impact category (e g. CO2, CH4 or N2O to global warming). Fourthly, through interpretation, the findings from the inventory analysis and the impact assessment are combined in order to draw conclusions or formulate recommendations. In the case of micro cogeneration, specific issues are associated with data uncertainty and forecasting, because many of these technologies are not yet fully developed (Pehnt 2003). In addition, cogeneration is a technology path with joint or co-products, which have to be taken into account to obtain a full picture of the environmental consequences. 5.1.1 Considering the Co-product For the results of an LCA of cogeneration systems, the way that the coproduct is considered turns out to be important. As cogeneration systems produce heat and electricity simultaneously, and the comparison to other, non-cogeneration systems often takes place based on the functional unit “1 kWh electricity” or “1 kWh heat”, both products need to be taken into account together. This situation is very similar to that which many companies have to deal with when they have more than one product to sell. Take for instance a farmer raising cows. Each cow produces milk; but eventually it will be slaughtered and converted into meat. How can the farmer allocate the cost of feeding a cow to produce both milk (daily) and meat (at the end of the cow’s life)? There are two main ways to deal with this problem. The first is allocation of the cost between the products with an appropriate key. In the case of the farmer, this might be the relative nutritional value of milk and meat, or the prices of milk and meat on the market. For the case of a cogeneration system, one allocation key could be the energy generated. Take the example of an electric efficiency of 40 % and a thermal efficiency of 40 %. For each kWh electricity, one kWh heat is produced. The allocation key would thus be 50:50. That means that 50 %

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of the CO2 emissions are related to the production of electricity and 50 % to heat. However, this allocation key does not really characterize the value of the products. Instinctively, one kWh electricity seems more valuable than one kWh low-temperature heat. And, in fact, only a fraction of the heat could be converted into electricity. Therefore, often the exergy is used as the allocation basis. Exergy describes the amount of useful energy that is contained within a product. The exergy of electricity is equivalent to its energy, whereas the exergy of heat, in contrast, is given by the Carnot efficiency multiplied by the energy value. The second way to deal with co-products is to estimate the avoided burden. If a cow, for instance, had not produced milk, it would have been necessary to buy some substitute, such as soy milk. The total cost for its meat would then be the sum of feed costs over the lifetime of the cow minus the avoided costs for soy milk. In the case of a micro cogeneration system, this means that – if we want to compare micro cogeneration to other electrical power plants – we have to identify the heating systems that would actually be replaced by such systems. This depends on a number of factors, for instance the country, the type and age of the houses, the preferred fuels, and the like. It also depends on the perspective of the decision-maker: from the perspective of a home owner who installs a new system, it is the individual, old heating system that might be superseded by a micro cogeneration system. Boiler manufacturers might think of micro cogeneration competing with other modern heating systems. A politician who has to decide which heating system to support financially will have to consider, for instance, a micro cogeneration home energy system compared to a modern condensing boiler. For the cogeneration systems investigated here, we choose the avoided burden approach, where the co-product is credited with an alternative generation route. This approach reflects most accurately real decisionmaking situations. Also, if we had chosen an allocation procedure, it would be necessary to compare micro cogeneration to other electricity and heat systems simultaneously. We furthermore regard electricity as the main product, while generated heat is credited, and analyze the replacement of a gas condensing boiler by a variety of micro cogeneration systems. The question answered through this substitution perspective is: which environmental impacts do micro cogeneration systems have if we install them instead of a modern gas condensing boiler? Choosing this perspective relies on the following assumptions:

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x Fuel. We want to determine the effects of a new technology, not of switching fuels. For instance, switching from oil to gas offers environmental advantages. However, this fuel switch can also be accomplished with other technologies. It cannot be causally attributed to micro cogeneration. Therefore, we assume the same fuel for the substituted heat supplying technology. x Marginal systems. Usually, micro cogeneration will not be installed as a substitute for an older technology. It will rather be viewed as an alternative to another modern technology when replacement is required in order to meet future demands for heat and electricity. In this sense, two modern, marginal systems are to be considered as substitutes. Hence, for investors, households, or decision makers, the relevant question is: which technology is to be preferred from an environmental perspective? Combining these two assumptions, a modern gas condensing boiler is considered as the substituted heat technology. It should be kept in mind that this way of crediting is the most conservative way to assess micro cogeneration. The advantages of micro cogeneration, compared to central generation without it, increase significantly as soon as less modern technologies or fuels with higher carbon contents are considered as the substituted heat supply. Which electricity system should the micro cogeneration systems be compared to? Again, this depends on the perspective of the decision maker. To identify advantages and disadvantages in comparison to the status quo, the current electricity mix can be chosen as a benchmark. Generally, however, we need to take a dynamic, forward-looking perspective. In Germany, for instance, some 40 GWel power plant capacity must be replaced by 2020 (see Chap. 2). Micro cogeneration represents one alternative way to cover this demand for new capacity. Micro cogeneration should, therefore, be compared to modern marginal power plants that would typically be installed. In many cases, this will be a natural gas power plant. This procedure is in accordance with the EU directive on cogeneration, which demands that each cogeneration unit shall be compared with the best available and economically justifiable technology for separate production of heat and electricity on the market in the year of construction of the cogeneration unit (EU 2004).

On the other hand, the generation characteristics of micro cogeneration systems tend to contribute to peak load as well. The peak load power mix differs from country to country. In Germany, for instance, it includes low

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efficiency gas power plants, but also virtually CO2 free hydropower plants. In our environmental comparison, we include both mix and gas combinedcycle plants to represent the alternative paths for centralized electricity generation. 5.1.2 Input Data for Micro Cogeneration Systems, Fuels, and Conventional Power Plants The micro cogeneration systems investigated have already been defined, as summarized in Table 4.1, and include several fuel cell, Stirling, and reciprocating engine configurations. These are compared to larger cogeneration systems, such as a large reciprocating engine and a gas combined-cycle plant both feeding district heating systems. As benchmarks for separate generation options, a gas combined-cycle plant without cogeneration, a modern lignite power plant, and the future German electricity mix, as forecasted by Enquête (2002), are assessed. The reference time of the comparison is the year 2010. We choose this base year because several of the micro cogeneration systems, namely the fuel cell, the very small reciprocating engine, and the Stirling engine, are not yet fully technologically mature. For these systems, we do not evaluate the status quo, but rather extrapolate the technical performance to the year 2010, to take into account further expected technological progress. We restrict our LCA analysis to natural gas and fuel-oil as fuel. Even though micro cogeneration can, in principle, be operated with other fuels (see Sect. 9.4 for a discussion on fuel flexibility), the greater part of the systems will be operated with natural gas. Furthermore, by 2010, renewable micro cogeneration systems, such as pellet Stirlings or biomass gasification/fuel cell units, are not yet likely to be mature. It is obvious, however, that with respect to greenhouse gas emissions, the use of renewable fuels would be preferable (see Sect. 5.2.2) . For the purpose of our research project, life cycle data were obtained for various micro cogeneration and conventional systems from the system manufacturers and additional data sources. The LCA data were then implemented using the material flow and life cycle program Umberto (www.umberto.de). This program calculates the impacts caused by the full life cycle of the micro cogeneration systems and carries out an impact assessment in accordance with the international standard ISO 14042. The fuel cell LCAs are based on our analysis in Krewitt et al. (2004). The materials LCAs used for the various technologies, such as catalyst materials (e.g. platinum group metals), building and structural materials (such as concrete and steel), and materials for the electrical equipment

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(copper etc.) are mainly based on Pehnt (2002). The natural gas LCA, as modeled in Umberto, represents a standard import mix for Germany, extrapolated to the year 2010 (gas sources: Germany 13 %, Netherlands 19 %, Norway 33 %, GUS 35 %). Electricity and conventional heat production data are taken from the detailed bottom-up Umberto/IFEU database. The district heating systems are based on the detailed model described in Chap. 4, including heat losses depending on the heat density, the length and isolation of the distribution grid, etc. To account for uncertainties regarding the actual course of future development, but also variations with respect to application, manufacturer, technology, and other parameters, error bars are used to show the bandwidth of results. Some of the important input parameters included in the bandwidth are discussed below with respect to representativeness and validity. x Thermal efficiencies depend strongly on: the application context, e.g. on whether a condensing operation can be achieved; which return temperatures are possible; how many start/stop procedures are carried out; how many full load hours are possible, etc. In addition, it is important whether a condensor is applied to exploit the condensing heat of the exhaust gas. This can, in principle, be used in most micro cogeneration applications. Often, it is rather an economic than an environmental question whether this extra device is used or not. Condensing operations are included in the possible system designs investigated here (Table 5.1). x The emission of NOx particularly of reciprocating engines varies strongly, depending on the emission reduction concept used (O = 1 or lean operation, see Sect. 1.2.1), manufacturer, operation mode (partial load operation, static or dynamic operation, etc.), age of the system, and maintenance interval. The latter two aspects are particularly important for reciprocating engines. The NOx emissions of O= 1 systems can vary by one order of magnitude, depending on whether the catalyst has been newly exchanged or not. Likewise, emissions are very sensitive towards the calibration of engine characteristics. Engines in lean operation typically show more stable, but somewhat higher, emission levels. For the small Stirling engine, e.g. the WhisperGen, higher NOx emission factors are reported. However, it is assumed that future systems will show reduced emissions, comparable to conventional gas burners. x There is still uncertainty with respect to the bandwidth of unburnt methane (CH4) emissions from reciprocating engines. In the literature on engine CHP, emission factors from 20 to 500 mg per MJ fuel input can be found. A Danish study, for instance, states that “compared to

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complete combustion, the global warming potential for gas engines was on average raised by 20 % by the emission of unburned fuel” (Kristensen et al. 2004). Due to the high global warming potential of CH4 (the impact of one kg CH4 corresponds to 23 kg CO2), 500 mg methane per MJ fuel corresponds to some 150 g of CO2 equivalent per kWh electricity produced; methane emissions thus have a significant impact on overall emissions. Here, we assume a bandwidth of 10 to 320 mg/MJ fuel input, with 100 mg/MJ as default value based on field tests of reciprocating engines (Senertec 1992-2003). For fuel cells and Stirling engines, the emission factors are orders of magnitude lower. x The condensing boiler as an “avoided burden system” is assumed to have an average efficiency of 97 %. This figure, indicating the somewhat low efficiency of the condensing boiler, was based on a large number of systems investigated in a variety of studies. It has been shown that the potentially high efficiency obtainable from the condensing operation cannot always be achieved, particularly in the summer. Table 5.1. Input data for the LCA of micro cogeneration systems (see Table 4.1) Micro CHP Reciprocating engines

Economic Lifetime

11

12

50 kW

10

SOFC

9 PEMFC

8 9.5 kW

7

3 kW

6 0.8 kW

5 3-6 kW lean (LowNOX)

4 3-6 kW lean (HighNOX cond)

Bandwidth

3a

Comb. Cycle w/CHP

3-6 kW lean (Fuel oil)

Efficiency (max) Electric Total NOx emission Default

3

Recipr. engine

3-6 kW lean (HighNOX)

Efficiency (min) Electric Total

2

Fuel cells

3-6 kW (l=1)

Capacity (Default) Electric Thermal Efficiency (Default) Electric Total

1

Stirling engines

1kW

Reference number

Larger CHP

kWel kW

1,0 3,25

4,7 12,5

5,5 13,9

5,3 11,4

5,5 14,9

5,0 12,6

0,8 6,0

3,0 15,0

9,5 28,5

4,7 12,5

1,0 2,7

50,0 98

-

20% 85%

25% 88%

25% 88%

28% 88%

25% 93%

25% 88%

10% 85%

15% 90%

24% 96%

32% 32% 85% 85% *

30% 88%

**

45% 88%

**

-

20% 80%

25% 84%

25% 84%

25% 88%

25% 84%

10% 80%

15% 85%

22% 88%

28% 28% 80% 80% *

28% 85%

**

45% 80%

**

-

20% 85%

25% 95%

25% 95%

25% 99%

25% 95%

12% 90%

19% 94%

26% 32% 32% 100% 90% 90% *

33% 90%

**

49% 88%

**

125

300

300

135

80

80

mg/Nm

3

n.a.

mg/Nm

3

n.a.

2150

80

50-400 70-400 n.a. 70-400 60-200 - 20-110 20-110 80,000 hours or 15 years, whichever is lower

All efficiencies are seasonal. * plus hot stand-by loss ** plus distribution losses

Lean = lean operation, cond = use of condensor

3

3

125

95

-

-

50-400

n. a.

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5.1.3 Impact Assessment For an impact assessment, characterization factors are required so as to be able to calculate environmental interventions (such as greenhouse gas emissions or acidification) from emission factors. For this study, we take characterization factors in accord with standard LCA procedures (CML et al. 1992; UBA 1995; Franke and Vogt 2000; Giegrich and Detzel 2000). Due to space limitations, we can only present results for two important selected impact categories in this book: the emission of greenhouse gases (GHG) and acidification. The first category represents climate change effects, but also reflects the use of fossil resources, as the impact category is dominated by CO2 emissions from fossil fuel use. The second assesses the contribution of local emissions of, for instance, NOx, NH3 and SO2 to acidification. Structurally similar results could have been obtained for eutrophication, for example. A number of additional impact categories are included in the model but will not be reported here. The results of these cradle-to-grave analyses will be described in the following sections. First of all, the contribution of micro cogeneration to climate change will be assessed (Sect. 5.2.1). Then emissions of pollutants are discussed in Sect. 5.2.2, followed by an assessment of immissions (5.2.3), and ending with a comparison on the household level of individual operators of micro cogeneration (Sect. 5.2.4).

5.2 Results of the Life Cycle Assessment 5.2.1 Greenhouse Gas Emission Reduction of Natural Gas Micro Cogeneration Micro cogeneration versus central electricity production. As far as the prevention of GHG emissions is concerned, micro cogeneration systems are superior not only to the average electricity supply mix in Germany, but also to efficient and state-of-the art separate production of electricity in gas operated power plants and heat in condensing boilers (Fig. 5.1). Compared to separate generation with a natural gas combined cycle plant (without cogeneration) and a natural gas condensing boiler, micro cogeneration reduces GHG emissions by between 10 to 30 %, with the exception of the small Stirling engine. With lower electrical efficiency, its GHG level lies above the one of a gas combined cycle plant. Similar reductions are achievable with respect to primary energy demand.

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There is still some uncertainty about the achievable total average efficiency of fuel cell systems. Estimates for future domestic systems range between 80 and 90 %, whereas today the systems are far from this value. When taking the lower bound of 80 % total efficiency for fuel cells only, the achievable reduction for domestic fuel cell systems does not seem very high. However, one can also reverse the argument: based on natural gas as a fuel, domestic systems might reach the same CO2 emissions as a modern gas combined cycle plant, even though the systems are a factor of 100,000 smaller. The reduction effects become greater when other fuels enter the comparison (see Sect. 5.2.2). For instance, compared to separate production with more coal-dominated electricity mixes, such as the German electricity mix, or even compared to a lignite power plant, GHG reductions above 50 % can be achieved. Also, comparison with oil-fuelled boilers would lead to even higher GHG reductions. In such cases, the GHG reduction is to a great extent due to a fuel switch from higher carboncontaining fuels to natural gas. Electricity w/o CHP

700 1030

600 500 400

Mix MixGermany Germany 2010

Lignite Lignite

CC (600 MW)

CC w/o CHP

CHP CCCC withw/CHP

Engine

9 kW 9 kW

Stirling

Reciproc. Reciproc. 50 kW

3 kW

0,85 kW 0,85 kW

Reciprocat. engine

3 kW

lambda = 1 lamda=1

Lean LowNOx lean, LowNOX

lean, condensor

Lean lean

Fuel cell

1 kW 1 kW

SOFC

0

SOFC

100

PEMFC

200

Lean, cond.

300

PEMFC

Climate Gases (g CO2 eq./kWh el)

District heating

Micro CHP

800

Fig. 5.1. Life cycle GHG emissions of micro cogeneration technologies compared to large CHP and conventional electricity production in the year 2010; Functional unit 1 kWh electricity at low voltage level, co-produced heat is credited (“avoided burden”; see Sect. 5.1.1)

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Which is the best micro cogeneration technology? The determination of the best among the micro cogeneration technologies depends considerably on the efficiencies achieved. Under the assumption that gas condensing boilers are being substituted for, all technologies (fuel cells, reciprocating and Stirling engines) are within a very narrow range, with the exception of the small Stirling engine, which has lower electrical and overall efficiency. The high total efficiency of the large Stirling engine leads to the lowest GHG emissions. Fuel cells reach almost the same GHG emission level as the large Stirling when they achieve a total conversion efficiency of 90 %. However, their thermal management is more complex, and the heat sources inside the fuel cell system are diffused. This makes it more difficult to harvest the heat co-produced in the system than, for instance, in a Stirling or reciprocating engine. Fig. 5.1 also unveils large variations in GHG emissions for each system. These are particularly caused by varying thermal efficiencies, which depend on a system’s context (e.g. return temperatures) and configuration. In addition, for reciprocating engines, the values for methane emissions due to unburned natural gas vary considerably (see Sect. 5.1.2). Therefore, the error bar for this technology is larger. Further research and measurements are needed in this area. Small versus large CHP. The comparison between the different sizes of CHP reveal that micro cogeneration leads to GHG emissions on a level similar to district heat cogeneration. Whereas the electrical efficiencies of large plants are generally higher than those of smaller units (Fig. 1.3), the total efficiency of large plants is not in general higher than that of the small systems. In addition, heat distribution losses for the district heating systems and electricity distribution losses in the case of large combinedcycle (CC) plants have to be taken into account. Whether large or small CHP is favorable, therefore, depends on the specific situation under investigation. In any case, district heating systems are not only an efficient way of realizing CHP, but also offer the possibility of a straightforward integration of renewable energy carriers, such as biomass or solar thermal energy, into the heat supply (see Chap. 9).

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Table 5.2. Reduction of greenhouse gas (GHG) emissions per kWhel produced, achieved by micro cogeneration technologies with different baselines and heat credits; shown are the values for the default cases in Table 5.1; fuel: natural gas GHG reduction (heat credit: cond. boiler) compared to

Technology Status 2010

Fuel cell

PEMFC SOFC

Reciprocating engine

Stirling engine

Comb. Cycle w/o CHP 27%

Mix G 2010

Lignite

41%

67%

21%

36%

65%

1 kW

8%

25%

59%

lean

22%

36%

65%

lean, condensor

33%

45%

70%

lean, LowNOx

22%

36%

65%

lamda=1

22%

36%

65%

0.85 kW

-11%

9%

50%

3 kW

23%

37%

65%

9 kW

44%

54%

75%

Example: Production of electricity in a SOFC produces 36 % less GHG emissions than the future German electricity mix when we assume that a gas condensing boiler is replaced.

5.2.2 Pollutant Emissions It is not only climate change that is an issue of current environmental policy efforts. More generally, the protection of human health and the environment is in focus. In Europe, Directive 2001/81/EC on national emission ceilings for certain atmospheric pollutants, the so-called NEC directive, controls the reduction of sulfur dioxide (SO2), nitrogen oxides (NOx), volatile organic compounds, and ammonia (NH3). The aim is to combat impacts such as acidification, eutrophication, and ground-level ozone. This is to be achieved by limiting annual national emissions so that they do not exceed a ceiling laid down in the annex of the directive. Germany, for instance, is required to further reduce NOx emissions in the year 2010 by 22 % compared to the year 2000. Even this emission reduction, according to the German Advisory Council on the Environment, will not be sufficient to meet the long-term goals of the NEC directive. Even though the low level of ambition of the directive is criticized by many institutions, scenario calculations show that many countries will not even be able to comply with its soft ceilings. According to the European Topic Centre on Air and Climate Change, the main problems foreseen by countries relate to the emission of NOx (ETC-ACC 2004). In the past few

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decades, emissions of NOx have generally decreased significantly, particularly due to measures taken regarding power plants and vehicles. In the recent past, however, the rate of reduction has decreased significantly, too. The specific contribution of energy-related technologies to pollutant emission reductions is significant. Table 5.3 summarizes for some important air emissions the contribution of the energy sector to total European emissions. For instance, only 18 % of 1998 European NOx emissions stemmed from the “energy industry“ sector, while the dominant part was emitted by the transport sector. Of course, this does not imply that reducing NOx in the power sector is of no importance. But it indicates the order of magnitude a possible reduction of impacts implies for the overall European emissions situation. It is remarkable that, for SO2, the energy industry causes almost two thirds of the European emissions, mainly due to coal power plants. It therefore seems reasonable to investigate options toward reducing these emissions, and to ask whether micro cogeneration may help lead to such a reduction path. Table 5.3. Contribution of the energy sector to total pollutant emissions in EU15 (Source: EEA 2001, 2004) % CO2 NOx SO2 N2O CO CH4 NMVOC NH3

1980 25.1 57.3 1.0 0.3 01

1990 34.6 21.3 61.6 4.3 0.9 0.2 0.3 0.1

1998 32.3 18.0 65.0 3.8 1.0 0.4 0.4 0.1

2001 33.0

It is common to all gas-based power plants that the emission of SO2 is almost completely avoided. Also, in gas-based micro cogeneration and other power plant technologies, the contribution of ammonia to, e.g., acidification, is almost negligible. Therefore, of all exhaust emissions by micro cogeneration systems, NOx is of particular ecological importance in the context of the NEC directive. Nitrogen oxides are formed during the combustion process in most of the micro cogeneration technologies and contribute to many environmental impact categories, such as acidification, human health impairment, and eutrophication. Furthermore, NOx assists in the formation of Ozone and thereby contributes to summer smog and global warming; it also is a precursor material for the formation of small particles.

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Whereas the total efficiencies of micro cogeneration technologies are similar, the various technologies differ considerably with respect to their emissions, particularly of NOx. Reciprocating engines, which are based on discontinuous combustion at high temperatures, exhibit the highest emission factors. Stirling engines, due to their continuous combustion and the possibility of applying modern burner technology (such as flameless oxidation burners), lead to very low emission factors. This is also true for fuel cells, due to the electrochemical nature of their combustion, the comparatively low temperatures involved in the reforming reaction, and the requirement to clean up impurities such as sulfur and CO. The direct NOx emission factors for the operation of micro cogeneration systems, as derived from analysis of existing technologies and field tests, are given in Table 5.1. In the following, we will concentrate on acidification as an important impact category, mirroring particularly the differences with respect to NOx emissions of micro cogeneration technologies and, when compared, for example, to coal power plants, SO2 emissions. In Germany, micro cogeneration systems have to be “state-of-the-art” in terms of pollutant emissions (see Sect. 8.1.7). This standard is regulated by the administrative instruction “TA-Luft”; the values of the TA Luft will be easily fulfilled by all micro cogeneration systems (Table 5.1). However, as pointed out in Sect. 8.1.7, in some other European regions, emission legislation is much stricter than in Germany with respect to small CHP. Fig. 5.2 displays the results of the life cycle assessment of the micro cogeneration technologies for acidification. It shows that fuel cells offer great advantages with respect to environmental impacts that are caused by local pollutants, such as acidification (mainly due to NOx and SO2). This also holds for other impact categories not shown in the figure. Unlike engine CHP plants, fuel cells couple the advantages of reduced energy consumption with low direct emissions. The remaining acidifying emissions stem mainly from their natural gas operating supply and, to a much lower degree, from system production (for the PEMFC, 13 % of the total life-cycle emissions stem from system production, for the SOFC 9 %). Similar advantages can be achieved by means of Stirling engines, which have very low direct emission factors as well, at least in the case of the innovative FLOX burner. For the small Stirling engine, we assumed that NOx emissions of 80 mg/Nm3 will be achieved in future systems from high-volume production. Acidifying emissions from small reciprocating engines (considering the heat co-product) are somewhat higher than those of centralized gas power plants, due to more efficient emission control in large power plants.

5 Environmental Impacts of Micro Cogeneration District heating

Micro CHP

1800

101

Electricity w/o CHP

CC (600 w/o CHP MW)

*

Mix Germany Mix Germany 2010

*

*

Lignite Lignite

*

CCCC with w/CHP CHP

9 kW

9 kW

Lean

Lean, cond.

200

1 kW

SOFC SOFC

400

PEMFC

600

PEMFC

800

3 kW

1000

3 kW

1200

0,85 kW

1400

lambda = 1

Lean, lowNOx

Acidification (mg SO2 eq./kWhel)

1600

0

Stirling

Reciproc. Reciproc. 50 Engine kW

Reciprocat. engine

0,85 kW

lamda=1

lean, LowNOX

lean, condensor

lean

Fuel cell

1 kW

-200

Fig. 5.2. Life cycle assessment of acidifying emissions (NOx, SO2, NH3) of micro cogeneration technologies compared to large CHP and conventional electricity production without CHP

5.2.3 Local Impacts from Air Pollutant Releases When interpreting the LCA results for pollutant emissions, it is equally important to evaluate the impact of these emissions on the recipients side: how does the local air quality change due to the emissions? To address this question, the environmental relevance of the additional NOx emissions of reciprocating engines will be assessed. For this purpose, a dispersion calculation for a virtual residential area was carried out, based on the software package AUSTAL 2000 (AUSTAL2000 2003). For this calculation, it was assumed that, in a residential area based on multi-family residences, one third of the houses would be equipped with a reciprocating engine. This corresponds to 100 systems in a 1 km2 area. In addition, avoided air pollutant releases due to the substitution of an alternative gas heating system are accounted for. With respect to technical parameters, we conservatively assumed 5000 hours of full load operation per year, an NOx emission factor of 300 mg/Nm3 (expressed as NO2, see Table 5.1), and a share of 10 % NO2 of primary NOx emissions. This latter assumption is of great importance, because NO2 is of primary environmental concern. A site with flat topography with relatively critical weather conditions was selected: non-

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0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.4 0.3 0.3 0.3 0.2 0.2 0.3 0.3 0.1 0.1 0.0 0.4 0.5 0.5 0.5 0.5 0.6 0.5 0.5 0.5 0.5 0.6 0.4 0.5 0.4 0.4 0.4 0.4 0.2 0.3 0.2 0.0

900

0.4 0.5 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.5 0.4 0.4 0.4 0.4 0.4 0.2 0.2 0.0 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.5 0.5 0.4 0.5 0.4 0.4 0.4 0.4 0.3 0.0

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Vertical (m) Hochwert, m

700

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-100 -100

0

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200

300

400

500

600

700

800

900 1000 1100

Rechtswert, m Horizontal (m)

Fig. 5.3. Annual average concentration of NO2 in ambient air (Pg/m3) in a residential area due to installation of 100 reciprocating engines per km2

Hochwert, m Vertical (m)

1100 1000

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0

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Rechtswert, m

Horizontal (m) Fig. 5.4. Short-term concentrations of NO2 in ambient air (Pg/m3; indicating the concentration that is not exceeded in more than 18 hours/a) in a residential area due to installation of 100 reciprocating engines per km2

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uniform wind distribution, large share of stable weather situations, and low wind speed that tend to lower the dispersion of pollutants. The surface texture corresponds to that of an urban area. The results of this calculation are shown in Fig. 5.3 and Fig. 5.4. Fig. 5.3 depicts the additional annual average concentration of NO2 in the residential area due to net emissions from reciprocating engines. The annual average of 0.6 Pg/m3 can be compared to the permissible level for the annual average NO2 concentration; the German limit being 40 Pg/m3. The air concentration associated with the installation of the 100 units is very low – below a level of irrelevance, which is by German law defined as 1.2 Pg/m3. In addition, the maximum short term concentrations of NO2 in air (i.e. not to be exceeded in more than 18 hours) are well below 7 Pg/m3 (Fig. 5.4), compared to the allowable level which by German law is 200Pg/m3. With respect to the impact on ambient air quality, reciprocating engines are not critical under the given circumstances. It has to be reiterated, however, that a flat topography was chosen for this analysis. Complex terrain (e.g. a narrow valley) might cause higher pollutant concentrations in certain places as calculated here. From a national perspective, of course, every measure to reduce NOx emissions is welcome. This is why, from our perspective, low-NOx reciprocating engines should be further developed and marketed. The market leader, Senertec, for instance, offers a high- and a low-NOx system. The specific capital cost of the latter is approximately 10 % higher. Thus, only 4 to 5 % of the Dachs systems sold belong to the low-NOx class. 5.2.4 From Specific Impacts to Supply Objects In the preceding sections, we have analyzed the environmental impacts per unit of electricity or heat produced, i.e. we have looked at the specific impacts. In addition, it is instructive to investigate the impacts per supply object, e.g. per single-family house, per apartment house, per hotel, etc. The question we want to answer here is: how much environmental impact reduction can be realized in concrete supply objects with concrete micro cogeneration systems? To answer this question, the specific environmental impacts (per kWh energy supplied) are multiplied by different full load hours, giving the annual environmental impacts. This analysis involves a further step: we need to analyze the amount of electricity and heat produced by the CHP unit, depending on the object and the CHP system (size, partial load characteristics, etc.). This investigation was begun in Chap. 4 to determine the economic viability of micro cogeneration. We can build on the results of that chapter, i.e. the full load

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hours, the share of own electricity consumption and grid electricity, the amount of heat produced in the peak boiler, etc. As the technologies were defined identically, we can directly use those results for further calculations. It is important to note that the calculations in Chap. 4 are based on real available or planned systems. For instance, the calculations for a singlefamily house utilize an 850 Watt Stirling engine (like the WhispherTech), a 1 kW solid oxide fuel cell (like the Sulzer Hexis system) or a 1 kW reciprocating engine (Honda) (Table 5.4). The differing efficiencies and power-to-heat ratios also imply different full load hours. We have chosen this approach because it provides additional information; we can not only estimate the impact reduction per supply object, but also how well a particular system fits the need of a supply object. Table 5.4. Investigated technologies for the LCA of supply objects Reciprocating engine

Stirling engine

Fuel cell

District heating

1 kW

850 Watt

1 kW SOFC

5.5 kW

3 and 9 kW

4.7 kW

20 kW rec.eng. w/ 17.8 % heat loss 50 kW rec. eng. w/ 2.4 % heat loss

Hotel 5.5 kW 3 and 9 kW Full load hours (h/a) Single-family (low) 3373 1940 Multi-family (average) 5526-5639 5509-4160 a Hotel 5555-5730 5505-3939 a Share of electricity produced in CHP (%) Single-family (low) 29 13 Multi-family (average) 24 13-31 a Hotel 26 14-31 a Share of heat produced in CHP (%) Single-family (low) 95 100 Multi-family (average) 61-65 65-93 a Hotel 65-68 68-92 a

4.7 kW

Technologies Single-family (low)

Multi-family (average)

a

First value: small Stirling, second value: large Stirling

4786 6432 7015

4800 6456 -

41 24 24

39 17 17

68 39 45

62 30 -

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Beside the LCA of the specific impacts (per kWh) of each CHP unit, which were derived in the preceding sections, we need to model the energy flows of our supply objects (Fig. 5.5). Therefore, for each object, we need to include the following information: x The net electricity demand of the supply object. The supply object may require additional electricity, and the CHP unit may also feed electricity into the grid. We assume that the substituted electricity and the electricity fed into the grid have the same “quality”. This is, to a certain extent, a simplification because micro cogeneration systems are very often thermally led; the electricity production of micro cogeneration units is therefore at maximum in periods of high space-heating demand, which are often also times of high electricity demand. Therefore, micro cogeneration might avoid the need for electricity production from environmentally more problematic peak load power plants (see Sect. 5.3.2). Assuming the identical quality of grid electricity bought by the supply object and of electricity fed into the grid, we therefore calculate a net electricity demand. It can be either positive, if less electricity is sold to the grid than bought, or negative, if more electricity is fed into the grid than bought. x The CHP unit does not cover the full thermal load of the object. Therefore, peak load demand is considered to be covered by a modern gas condensing boiler. This supply combination of micro cogeneration, grid electricity, and condensing boiler can then be compared to the reference, which assumes 100 % coverage of electricity demand via the German electricity mix from the grid and heat demand from a condensing boiler. Again, our reference time is 2010. The functional unit for this type of analysis is the supply of an object with heat and electricity for one year.

Electricity from grid Electricity consumption CHP system

Electricity feed-in Heat demand

Peak boiler

Fig. 5.5. Analysis of supply objects

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Reference case Reciprocating engine cond Stirling engine 9 kW District heating

Reciprocating engine Stirling engine small Fuel cell

80%

40%

20%

System not available

60% System not available

(Reference case = 100 %)

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0% Single-family (low)

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Hotel

Fig. 5.6. Greenhouse gas emissions of different supply objects Reference case Reciprocating engine cond Stirling engine 9 kW District heating

Reciprocating engine Stirling engine small Fuel cell

100%

40%

20%

System not available

60% System not available

(Reference case = 100 %)

Acidifying emissions

80%

0% Single-family (low)

Multi-family (average)

Hotel

Fig. 5.7. Acidifying emissions of different supply objects Selected supply objects (see Chap. 4): single-family house with low average heat demand, multi-family house with average heat demand, and small hotel; functional unit: supply of an object with heat and electricity for one year; reference case: grid electricity and gas condensing boiler

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The results of this analysis for the impact categories GHGs and acidification are shown in Fig. 5.6. In all cases, the default technology assumptions listed in Table 5.1 are used for the assessment. Several important conclusions can be drawn based on this analysis: x Unsurprisingly, the advantages of the individual technologies, as assessed in Chap. 5.2, are mirrored in this analysis. This means that CHP technologies offer climate advantages, the fuel cell offers additional acidification advantages, and so on. x On the other hand, in an economically optimized system configuration, the CHP units cover only between 10 and 40 % of the electricity demand, and between 30 and 100 % of the heat. This implies that the rest has to be supplied by the electricity mix and the conventional heat system. Therefore, the GHG emission reduction of around 20 to 30 % in Fig. 5.1, for instance, is reduced to between 10 and 20 % when regarded per object supplied, due to the constant base demand of peak boiler heat and electricity. x From this perspective, the fuel cell can increase its competitive advantage particularly in the case of the single-family house. The reason is that these systems are limited by the prevailing heat demand. Because the fuel cell has a higher power-to-heat ratio, it produces more electricity for a given heat demand and can thus substitute higher amounts of grid electricity. The district heating system, in contrast, has rather high losses of 17.8 % in the case of single-family houses (and concomitant low heat demand density). x In the multi-family house connected to the district heating grid, in contrast, the heat losses drop to 2.4 %; thus, the difference between district heating and micro cogeneration shrinks as well. In addition, however, district heating has a lower share of the overall heat supply. In absolute terms, GHG reductions from one ton per year (single-family house) to 11 tons per year (hotel) can be achieved by operating micro cogeneration compared to the electricity mix. Carrying out the same analysis for gas combined cycle plants as suppliers of grid electricity reduces these advantages. 5.2.5 From Gas to Renewables: Other Micro Cogeneration Fuels In the preceding section, only natural gas as a fuel was investigated, because we believe this will be an important fuel for many European applications (see Chap. 9).

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However, particularly for areas outside of larger population agglomerations, other fuels will be of high importance. Fuel oil can be more easily distributed in rural areas than gas. The picture changes further when we move to other regions worldwide. In Japan, for instance, liquefied petroleum or natural gas (LPG and LNG), fuel-oil, or other fuels will be important (see Chap. 13). Also, renewable fuels can, and in the mid-term will, also be used for micro cogeneration applications. It is not the place here to carry out a number of further LCAs. However, because of the relevance of fuel oil, it was included in a sensitivity analysis (Fig. 5.8). A reciprocating engine operated with fuel oil, on the one hand, combusts a fuel with higher carbon content and, hence, emits more CO2 per MJ fuel than gas. On the other hand, the efficiency of such a unit is slightly higher (by some 2 to 3 % points; see Table 5.1) than that of a gas unit. In addition, such units will not be replacing gas condensing boilers, but rather modern fuel oil heating systems. In Fig. 5.8, we compare a 5.5 kW gas- or fuel-oil operated engine (corresponding to the Senertec Dachs) with the large non-CHP power plants from Chap. 5.2.1 ff. We observe that in terms of GHG mitigation, the oil reciprocating engine achieves almost the same level as the gas engine for the reasons given above. However, the acidifying emissions are substantially higher in the case of the oil CHP unit. This is primarily due to the much higher NOx emissions of the fuel-oil CHP unit.

(Gas reciproc. engine = 100 %)

Normalized Environmental Impacts

800% 700%

GHG

600%

Acidification

500% 400% 300% 200% 100% 0% Gas reciproc. engine

Oil reciproc. engine

CC without CHP (600 MW)

Mix Germany

Fig. 5.8. Selected life cycle impacts of micro cogeneration technologies with gas and fuel oil compared to a combined cycle (CC) plant without CHP and conventional electricity production in the year 2010 Functional unit 1 kWh electricity at low voltage level; co-produced heat is credited with a gas condensing boiler (gas reciproc. engine) and an oil condensing boiler (oil reciproc. engine)

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When using renewable fuels, e.g. biogas or wood pellets, the overall GHG emissions for micro cogeneration systems will be drastically reduced. Even for rapeseed oil, the LCA will show significantly lower overall GHG emissions, despite its production requiring fossil fuel inputs and leading to further greenhouse gases due to the emission of N2O from the agricultural system (Gärtner and Reinhardt 2003). This positive GHG balance is, however, a general characteristic of most renewable energy systems (Pehnt 2005) and not only of renewable micro cogeneration, implying that also on the side of centralized production of electricity, large CHP, or decentralized heat production without cogeneration, renewable, and thus virtually GHG-free, systems could be identified. In other words: when we discuss renewable fuels, the GHG (and energy) assessment per kWh final energy delivered will be excellent for almost all conversion systems, regardless whether they are small or large. In the context of that discussion, aspects such as technical maturity, logistical feasibility and cost are very important to keep in mind (see Sect. 9.4).

5.3 Beyond the Single Micro Cogeneration Unit So far, we have discussed environmental impacts arising from installation of single micro cogeneration power plants. But there are also impacts on a more abstract system level, which are either caused by the number of systems, or which are of a more indirect nature. These impacts shall be qualitatively discussed in the subsequent chapters. 5.3.1 Avoided Grid Losses Micro cogeneration units produce electricity in direct proximity to the customer. Either the produced electricity is directly used within the object, or the CHP electricity is fed into the low-voltage grid, but typically not transformed to the medium-voltage grid. Grid losses are reduced not only by the reduced haul length, but also the lower net currents required and, thereby, the lower Ohmic losses and lower resistance of conductors and transformers, due to the lower temperatures of these devices. However, it is very difficult to determine actually avoided grid losses, because they “depend not only on the grid load displaced but also on the time, weather, load conditions, loadshapes, and – especially – physical placement in the grid” (Lovins et al. 2002). For example, on the low-voltage level, electricity losses in Europe range from 6.1 % in Germany and 9.6 % in France to 24.2 % in Croatia (Pehnt 2002;

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Frischknecht and Emmenegger 2003). For the United States, Lovins et al. 2002 report distribution losses ranging between 3 and 13 %. The possibility of avoiding grid losses also depends on the capacity of a system to reduce reactive power consumption and on the load following capabilities of the system. If, for instance, an electricity-led CHP device does not react instantaneously to changes in the electricity demand of the household, the excess electricity is fed into the grid. For thermally-led micro cogeneration units, in periods of low general consumption, grid losses might increase, whereas in periods of high consumption, the losses might decrease (Lehmann et al. 2003). Distributed generation might also enhance grid losses in cases where generation is located at the end of a network or connected with long feeding cables. Arndt et al. (2004) calculate the impact of micro cogeneration (fuel cell) systems for a given Bavarian low-voltage grid and determine a reduction of some 0.26 %-points. Converted to, for instance, GHG emissions, this would translate to only 2 g CO2 equivalents/kWhel for the German electricity mix. From an environmental point of view, this is only of minor importance. In terms of economic viability, however, the congestion relief of the grid can be of importance, especially in cases where adding grid capacity can be deferred or even avoided (see Chap. 9). 5.3.2 Connecting Micro Cogeneration to Create Virtual Power Plants Starting from the conventional micro cogeneration application, it is often argued that connecting many micro cogeneration units to create a “Virtual Power Plant” would offer additional economic advantages. But the virtual power plant application could also have additional environmental benefits: x Avoiding more “dirty” marginal power plants. When one central operator co-ordinates the operation of micro cogeneration units, one objective could be to minimize the demand for peak load electricity or even to use the devices for regulating energy for other fluctuating energy sources, such as renewable energy carriers. Regulating energy is not only more expensive but also, in many cases (exception: hydropower from reservoirs), more environmentally intensive with respect to GHG emissions and other impacts. In Germany, peak load power plants are particularly old fuel-oil and gas power plants. Even in cases where hydropower is used for peak load purposes, peak shaving would set free hydropower capacity for other purposes, such as integration of renewables.

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x Enhanced full load hours of CHP systems. A higher load factor due to more optimized system operation could lead to more CHP electricity and heat generation, thereby substituting for more conventionally supplied energy. Also, heat losses due to stand-by operation of CHP plants could be reduced in this way. x Enhanced acceptance by utilities of fluctuating energy systems. A more “company-psychological” factor is that, by employing virtual power plant communication, municipal utilities will more easily be prepared to accept fluctuating energy feed-ins, such as wind or solar power, because they have the possibility to partially balance these fluctuating energy contributions by controlling the electricity production of their individual systems. This aspect, however, is more focused on renewable-based virtual power plants and is less relevant for micro cogeneration. 5.3.3 Indirect Ecological Impacts through User Behavior Ecological impacts of technologies are not determined solely by their technological characteristics nor by their being embedded in technological and economical systems. New technological options may stimulate new behaviors, habits, and routines that counteract, or reinforce, the environmental effects of the technology (see also Chap. 6). It is difficult to predict the indirect effects of micro cogeneration, as no systematic research on its users has been done so far. However, we can make inferences from experience with other energy-related technologies. Among them are energy-efficient household appliances, efficient conversion technologies, and the use of renewable energy sources. In efficient appliances and conversion technologies, a rebound effect is often found (Gottron 2001; Menges 2003). This means that energy savings achieved by more efficient technologies are at least partly compensated, and sometimes overcompensated, by an increase in energy demand. The rebound effect can be traced to different causes. First, new technologies may stimulate energy demand by offering new comfort features. It is a well-known effect, to give an example, that the switch from single coal or wood stoves to central heating in residential buildings leads to increases in energy consumption of up to one third, even though central heating is more efficient. The reason is that, given the possibility to heat all rooms easily and comfortably, users increase the number of heated rooms as well as the average temperature (Kleemann et al. 2000, p.13; Wilhite and Norgard 2003).

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Secondly, energy-efficient technologies reduce expenditure for energy services and, therefore, set free disposable income, which may in turn increase the expenditure on energy-consuming appliances (direct rebound effect) or on consumer goods which need energy for their production (indirect rebound effect). Thirdly, psychological research on environmental consciousness and action has shown that environmental behavior is selective, and people draw up a “subjective ecobalance” by offsetting certain symbolic types of environmental action against behavior in other areas. Performing a specific “environmentally friendly” behavior salves the conscience and legitimizes abandoning environmental considerations elsewhere. Possessing an energy-efficient technology can therefore provide an excuse for using it excessively or using other energy-consuming equipment (Diekmann and Preisendörfer 1992 and 1998, Bilharz 2003). Similar considerations apply to the use of renewables: the sensation that energy is, economically and ecologically, “for free”, invites liberal use. Finally, if a resource is used less due to more efficient applications, the resource price declines, thereby stimulating demand for the resource again (market effect). However, new eco-effective technologies may also stimulate environmental consciousness. This is particularly true for energy conversion technologies. The installation and monitoring of a new conversion system implies an involvement with topics of energy conversion and use. In some cases, detailed feedback on performance is provided that can be compared with consumption patterns. Research shows that timely and detailed feedback on both electricity and heat consumption can greatly reduce them (Jensen 2003; McCalley 2003). Information on production, especially when combined with information on consumption, is likely to have a similar effect. Whether a new technology stimulates environmentally beneficial or unfavorable behavioral changes or not, depends heavily on the respective technology and on the context. Economic incentives for increased consumption are only present when the new technology indeed “pays off” and financial savings are not overcompensated for by rising energy prices. Direct rebound effects depend on whether increased appliance use or number of appliances indeed promises improved comfort – room temperature, for example, will not be raised indefinitely. Psychological offsetting of environmental benefits and damage depends on many aspects: how strongly is ecologically sound behavior perceived as a social or personal norm? Are we dealing with a conscious decision or habitual behavior? How much does the person know about the actual environmental effects of various behaviors? Whether information and

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feedback can help to change consumption patterns depends on subjective motivation and the actual amount, detail, and form of information provided. Various technologies and contexts lead to an array of different empirical findings. Van Elburg (2001) finds a strong rebound effect in cooling appliances and compact fluorescent lamps. Cooling appliances are replaced by bigger ones, and lamps are increasingly used to light previously unlit areas – for example, the garden. This is for several reasons. Apparently, both types of appliances provide noticeable financial savings that can be invested in additional appliances. Furthermore, bigger fridges allow comfort gains in terms of better planning of household purchases and supply, and illuminating the garden satisfies aesthetic and status needs. Nadel (2003), in contrast, reports very weak rebound effects in appliances, with the exception of air conditioning and compact fluorescent lamps. Unfortunately, no more details are given. Henderson et al. (2003) report that rebound effects in heat energy consumption occur after the installation of insulation especially in households with low prior energy consumption and in houses which had greater heat loss. Similar effects are found by Genennig and Hoffmann (1996) and by Haas et al. (1999) for home electricity generation via photovoltaics: electricity consumption rises in households with low prior consumption and decreases in households with high prior consumption. Apparently, the “free” energy is used to raise the comfort level of users who were previously deprived of such comfort. In contrast, Haas and Biermayr (2001) find no difference in electricity consumption between households using renewable energies and conventional households. A temporal perspective on changes in consumption, however, is lacking here. What is interesting is the fact that most renewable energy users subjectively perceive themselves as energy conscious and economical (Karsten 1998; Haas et al. 2001). Another interesting effect is observed by Haas et al. (1999) and Reif (2000): photovoltaics users are willing to adapt their temporal consumption patterns to the production patterns of their panels, in order to maximize self-reliance. In Reif (2000) this is supported by financial incentives. What can be inferred from these findings for micro cogeneration? 1. Micro cogeneration is targeted at home owners who, in Germany, form a relatively wealthy section of the population. It is safe to assume that the comfort levels of their dwellings are already high. Therefore, a significant increase of energy consumption is improbable. 2. A positive effect of feedback and increased involvement with energy topics is possible, but depends highly on the specific form, timing, and

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amount of detail of feedback, and on the presence of other incentives – e.g. price incentives, importance of independence, or ecological motives. It seems advisable to provide information both on production and consumption patterns to allow users to compare and match them. 3. Similar to photovoltaics, there is potential for adapting temporal consumption patterns. This opens up interesting possibilities for load management. 4. One potential rebound effect may result from the German Energy Savings Decree (Energieeinsparverordnung, EnEV). The decree sets a maximum level for the overall energy demand in new buildings. Building owners who install a micro cogeneration plant are permitted to apply less stringent heat insulation measures. However, poor insulation of buildings has very long-term implications on energy demand, while a micro cogeneration plant that has reached its technical life span may be replaced by a conventional boiler, increasing the energy demand of the building. 5. Finally, it is difficult to predict to what extent micro cogeneration possession may be used as a justification for otherwise ecologically unsustainable consumption patterns. This depends, among other things, on the relevance of ecological norms to the user, on the consciousness of behaviors, on the degree to which micro cogeneration possession is perceived as ecologically relevant, and on knowledge of its effects. This is a question that needs to be empirically explored.

5.4 Conclusions Most micro cogeneration systems are superior, as far as the reduction of GHG emissions is concerned, not only to average electricity and heat supply, but also to efficient and state-of-the art separate production of electricity in gas power plants and heat in condensing boilers. This claim is the result of our Life Cycle Assessment on the technology level. It is true, despite the strong dependence of the results on the electrical and thermal efficiency of micro cogeneration technologies and further parameters such as methane emissions from reciprocating engines. Effectively, at an electrical capacity of up to five orders of magnitude smaller than large gas combined-cycle power plants, lower GHG emission levels can be achieved. The GHG advantages of micro cogeneration plants are comparable to district heating with CHP. The performance of micro cogeneration technologies with respect to climate and resource protection depends mainly on the total conversion

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efficiency (including the thermal output of the system) that can be achieved. In some cases, an unfavorable heat integration of micro cogeneration systems may lead to operation at the lower end of the assumed bandwidths of total efficiency. In such cases, CHP systems come rather close to electricity production in modern combined cycle plants without CHP. The optimization of micro cogeneration implementation thus involves careful integration into the supply object. Generally, the systems should not be oversized, to ensure that the full amount of heat is actually used in the system. Under the assumption that gas-condensing boilers are the competing heat-supply technology, all technologies are within a very narrow range, with the exception of the small Stirling engine, with its lower electrical and total efficiency. Looking at the GHG reduction potential on the level of a supply object (e.g. a single-family or multi-family house), the mitigation potential is somewhat lower, because the micro cogeneration systems do not supply the whole energy demand. Rather, additional electricity from the grid and heat from a peak boiler have to be taken into consideration. Here, fuel cells offer the advantage of a higher power-to-heat ratio, implying that, for a given heat demand, more electricity can be generated that displaces conventionally produced electricity. Environmental impacts other than those related to climate and resource protection relate more specifically to technology. Whereas for fuel cells and Stirling engines (as long as these use innovative flameless burner technologies) emissions of air pollutants are extremely low, reciprocating engines emit more significant amounts of NOx, CO, and hydrocarbons. Furthermore, the emission factors of reciprocating engines depend heavily on operation characteristics, age and maintenance of the systems. Thus, larger bandwidths characterize this system. As a consequence, acidifying emissions of small reciprocating engines (considering the heat co-product) are somewhat higher than those of centralized gas power plants, due to more efficient emission control in the latter. In addition to investigating the emissions side, analysis of the immissions situation of a residential area supplied by reciprocating engines was carried out. The analysis shows that for selected, rather unfavorable, meteorological conditions, with a flat topography and urban housing structure, the additional immission of NOx due to the engines is below the value of significance according to German legislation, and does not create severe additional environmental impacts. The emissions reduction and resource protection potential of micro cogeneration could partially be offset by a “rebound effect”, implying that energy savings achieved by a more efficient technology are at least partly

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compensated, and sometimes overcompensated, for by an increase in energy demand. On the other hand, use of innovative energy systems in the household may rather sensitize its users regarding energy consumption and stimulate more energy conscious behavior. Which of either of these effects prevails is an empirical question. We suspect that increasing comfort will not occur to a relevant degree, because micro cogeneration is targeted at a part of the population which has already reached satisfactory comfort levels. The effects of additional income and psychological offsetting cannot be exactly determined. The former depends on to what extent micro cogeneration indeed produces financial savings. The latter is influenced by many factors, including environmental consciousness and knowledge about the environmental impact of various behaviors. A positive effect of feedback and increased involvement with energy topics is possible, both concerning total energy consumption and temporal adaptation of electricity use. The exact effect depends highly on the specific form, timing and the level of detail of feedback, and on the presence of other incentives. When interpreting the overall environmental achievements of micro cogeneration, it has to be kept in mind that, as long as the fuels for micro cogeneration units are based on fossil resources, greenhouse gases are emitted and finite energy resources used. Therefore it is necessary to embed the use of micro cogeneration units into a strategy of renewable energy carriers, energy efficiency, and energy saving.

6 From Consumers to Operators: the Role of Micro Cogeneration Users Corinna Fischer1

Technology does not develop autonomously, nor is its course solely determined by the quest for technological and economic optimisation. Rather, technology development is shaped by the actions and interactions of various societal actors. Technology users are an important constituent of this tightly woven network of actors. With an emerging technology like micro cogeneration, user influence begins with technology acceptance, which determines the chances of micro cogeneration to be introduced and to find widespread diffusion. This is particularly true when it is not being sold to housing developers or landlords, but directly to the end user, as in the case of single-family homes. Furthermore, users do not only accept or reject a new technology, but also participate in its development by giving feedback and interacting with producers. Finally, users can help or hinder the diffusion of a new technology by communicating about its advantages and disadvantages with other potential buyers. Apart from their role in technology development, users also have an impact on the sustainability of a technology by their patterns of use – be it through differences in handling, timing and intensity of use, or through indirect effects, such as the “rebound” effect, meaning that energy efficiency gains are nullified by increased consumption in other areas (see Sect. 5.3.3). Since micro cogeneration is in an early phase of the innovation cycle, little data is available with respect to patterns of use and sustainability. Therefore, we will focus in this chapter on technology acceptance and on user motives and demands that could inform further technology development. Since micro cogeneration is still in the introductory phase, a specific group of users is important to look at, whom Villiger et al. (2002) called

1

The author would like to thank a number of people for their valuable contributions. Raphael Sauter conducted the research and analysis of the literature. Martin Pehnt, Raphael Sauter, Katja Schumacher and Julia Werner gave detailed feedback on earlier drafts of this chapter.

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“innovators” and which we for conceptual reasons will name “pioneers”.2 Pioneers take up a new product in a very early stage of development, some even before general market introduction. Their role is to test and help develop the new technology and also to propagate it, paving its way into a broader market. Pioneers have specific characteristics. Rogers (1995) describes them as “venturesome”; interested in new ideas; financially wellestablished, which allows them to compensate for potential losses on an investment; and well-educated which enables them to understand the innovation. While the very first pioneers may be social outsiders due to their originality, pioneers in later stages have a high social status and substantial communication skills which help them communicate the new technological options. Micro cogeneration technology blurs the boundaries between energy consumers and producers. Consequently, there is a broad spectrum of individual or corporate users who are motivated by different mixtures of producer and consumer logic. On the “producer” end of the spectrum, there are municipal utilities testing micro cogeneration as a potential option to broaden their portfolio of supply technologies and services. On the “consumer” end, we can find micro cogeneration in private homes, primarily used as a heating system, while the electricity may be consumed in the household or fed into the grid to reap extra benefits. Between those two extremes, small industries and handicraft enterprises, service enterprises like hotels or swimming pools, public bodies, educational and social institutions like schools or hospitals, and nonprofit or business organisations use micro cogeneration, each with a specific mix of motives, including immediate economic benefits, future business opportunities, public relations, and educational or idealistic motives. Furthermore, operators may differ from end users of the products, such as, for example, when a municipal utility tests a micro cogeneration installation for district heating of private homes. The empirical evidence for current micro cogeneration types suggests that a variety of different user types and user / operator combinations indeed exists. We can find commercial users, private households, 2

The term “innovators” is ambiguous because it is used by Villiger et al. (2002) in a slightly different sense from Rogers (1995) on whose framework they build. In Rogers’ concept, “innovators” are entrepreneurs and engineers who develop an innovation, while users step in at a later stage, as “early adopters”. Villiger et al. (2002) term the very first users “innovators”. To avoid ambiguities, we describe such initial users as “pioneers”, which also matches well the terminology used in innovation and diffusion research in the political sciences.

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educational institutions, business associations, hospitals, municipalities or municipal energy suppliers as end users of all types of micro cogeneration, be they based on reciprocating engines, fuel cells or Stirling engines. The plants are being used for own supply, for the supply of third parties or for demonstration or educational purposes. Figures for the Senertec Dachs, which has to date sold over 10,000 units, suggest what typical shares might be like. Here, commercial users dominate (about 60 % of installed capacity), private households come second (about 32 %), complemented by a few municipalities (8 %). However, shares for private households seem to be growing, as in 2004 55 % of sales went to private homes (Karl Kiessling, Senertec Managing Director, personal communication). There is also a variety of operating arrangements. With a mature technology, such as reciprocating engines, most users seem to operate their plant themselves, as the experience with the Senertec Dachs demonstrates. By contrast, with an emerging technology, such as fuel cells, field tests are being conducted in which energy suppliers (e.g. RWE or EnBW) operate the fuel cell plants on behalf of end users. Experience with Stirling enginebased plants shows a variety of different operator / user combinations, for example, a municipal energy supplier running a plant to supply municipal buildings, another municipal supplier running one for the supply of private homes, or a commercial customer using one for his own supply (for an overview of projects see http://www.stirling-engine.de/referenz1003.html) In this chapter, we aim at describing micro cogeneration pioneers in more detail. After a short overview of the data and literature on which the analysis is based, we describe the target group in socio-demographic terms and discuss some of its relevant attitudes. The bulk of the chapter consists of a discussion of their relationship to micro cogeneration technology: their motives for testing micro cogeneration, what they expect from it, and how they evaluate it. After a discussion of the role of pioneers as potential multipliers, we add some remarks on barriers to micro cogeneration adoption.

6.1 Data and Literature At the outset, it is important to note that our endeavour is subject to considerable data restrictions, meaning that results are not available for all types of users or micro cogeneration technologies alike. The information stems from several sources. First, we have conducted an extensive study on pioneer users of fuel cell-based micro cogeneration. In 2001, the power utility “Energie Baden-Württemberg” (EnBW) initiated a field test of fuel-

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cell-based Sulzer Hexis micro cogeneration plants in German “pioneer households”. Potential participants were found via a newspaper advertisement campaign in spring 2002. About 6000 persons responded, of which almost 1000 were shortlisted for the test because their homes fulfilled the necessary requirements. To date, 15 plants have been installed, with plans to install about 55 by the end of 2006. The plants are operated and maintained by EnBW with users paying average tariffs for the heat and electricity generated by them. Of note is that the pioneer households had to pay a one-time “innovation contribution” of 2000 Euro, so no financial incentive was involved. To interpret the findings, it should be pointed out that the marketing strategy concentrated on the “fuel cell” aspect and did not elaborate on the notion of micro cogeneration in general. Our study is comprised of various components. Qualitative and quantitative data were collected to complement each other. First, we conducted a focus group discussion in December 2003 with the first seven actual users who had installed the device at that time. On the basis of an interview guide, group members were encouraged to discuss the reasons for their application, their experiences, advantages and disadvantages of fuel cell micro cogeneration as compared to other electricity or heat technologies, and their willingness to help in the diffusion of the technology. This discussion was complemented by three more group discussions and a postal survey, centered on persons who had applied to take part in the field test but who had not been chosen to actually test the device. However, we reasoned that non-chosen applicants' motives and attitudes would come close to those of actual users. The postal survey was sent out to a random sample of 462 applicants, that is half of the applicants who had been shortlisted. 142 of them responded, making a satisfactory response rate of 30 %. For the focus group discussions, all the applicants within the region around Stuttgart were invited. The aim was to keep travel distance to the discussion location below 50 km. There were 94 applicants in the region who were contacted by mail, 35 of whom volunteered to take part in a discussion. 28 were finally chosen on the basis of availability at the scheduled time, of which 26 actually showed up. Participants were randomly assigned to three groups. Discussion topics were similar to those of the actual users group, though instead of experiences we discussed hopes and fears regarding the fuel cells. Furthermore, a discussion of preferred ownership models was added. Additionally, we infer some conclusions from a literature study on analogous cases. We define “analogous cases” as technologies for home production of electricity and/or heat which are, in comparison with

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established ones3, innovative and advanced regarding efficiency and environmental effects. On the heat side, the investigated technologies were small biomass plants and solarthermal collectors. On the electricity side, most studies focussed on photovoltaics. The geographical focus was on Germany and Austria. Twelve studies dating from 1992-2003 were found which dealt with consumer aspects (Table 6.1. Literature basis of the study of analogous cases Across all data sources, the user types included comprise primarily private individuals, a few representatives of public administration or nonprofit associations, and a few business associations. Enterprises and energy suppliers are clearly under-sampled. The fuel cell micro cogeneration study focuses on end users and not on the operator (the EnBW). In the literature covered, end users and operators are usually identical4. Therefore, results presented in this chapter are valid for individual end users, and less so for associations or public bodies. To discover motives of business representatives, additional research will be necessary. Where possible, we compared our sample to representative studies of the German population. For socio-demographic characteristics, we used the “General Population Survey for the Social Sciences” (Allgemeine Bevölkerungsumfrage der Sozialwissenschaften ALLBUS), a representative survey concerning socio-demographic data and a number of current political and social issues that is conducted every two years (see http://www.gesis.org/Dauerbeobachtung/Allbus/). To analyse attitudes, a number of studies on attitudes regarding technology, energy or the environment were consulted.

3

4

Conventional German heating systems are gas- or oil-based central heating, gas-based apartment heating, district heating, and, in a few cases in East Germany, individual coal stoves. Electricity is usually taken from the grid. There is one exception, the study by Reif (2000), in which houses have been built and equipped with photovoltaics by a non-profit cooperative who made them available for hire-purchase to low-income families.

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Table 6.1. Literature basis of the study of analogous cases Study (by year) Hackstock et al. 1992 Greenpeace 1996

System ST PV

Topics

Sample

Information, motives, user evaluation of the Austrian ST Do-It-Yourself program Success of campaign (= number of PV systems installed), motivation, user evaluation of state support programmes Motivation, satisfaction, user evaluation of the support programme, electricity consumption behaviour

238 ST owners

1662 persons interested in the campaign Genennig PV 1445 PV 1996 owners in survey, 48 in interviews. Katzbeck PV Possession of other energy technologies; 32 PV owners 1997 attitudes towards electricity consumption, consumption data Rohracher BM Economic, technological and social 25 BM owners, and conditions, motivation, trigger, sources 28 multipliers, Suschekof information, user evaluation of state control group of Berger 1997 support programmes 116 Karsten PV Motivation, experience, suggestions 123 PV owners: 1998 106 households, 17 firms, associations and public bodies Haas et al. PV Characteristics of the users: are they 60 PV owners, 1999 “early adopters” as characterized by 17 merchants, Rogers (1995)? 660 experts Reif 2000 PV Output and consumption data, ratio of 23 PV users: output/consumption, degree of self22 households, reliance 1 kindergarten Haas et al. ST,PV Investment and consumption behaviour, 101 owners, 2001 BM, influence of structural aspects, attitudes control group of HP on energy consumption 177 Hübner and ST, Motives, barriers, desired characteristics Secondary study Felser 2001 PV of the technology Polzer 2003 ST, Number and size of systems in a town, 147 ST owners, PV motivation, satisfaction, suggestions 22 PV owners DENA 2003 ST Motivation, attitudes, image of the ST users, technology, barriers, user evaluation of sample size not support programmes provided PV=Photovoltaics, ST=Solarthermal collector, BM=Biomass boiler, HP=heat pump

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6.2 Socio-demographic Characteristics Users covered in the literature as well as in the fuel cell micro cogeneration study have a distinctive socio-demographic profile. They are usually families living in their own home, predominantly in rural areas and small towns. In addition, participants in the fuel cell micro cogeneration study were almost exclusively men5 in their mid-fifties (54.9 years on average), and thus well beyond the average age of 46.4 years of the German population over 18, as given by a representative sample (ALLBUS 2002). The findings on professional and educational status are particularly interesting. In the literature, user groups seem to differ slightly, depending on the technology studied. On the one hand, the users of solar thermal collectors (Hackstock et al. 1992; DENA 2003) and biomass (Rohracher and Suschek-Berger 1997) are predominantly non-academic, with a large share being farmers and skilled manual workers. On the other hand, users of photovoltaics (Genennig 1996; Karsten 1998, Haas et al. 1999; Haas et al. 2001)6 tend to be high-income academics with a special interest in socio-political issues in general and energy issues in particular.7 Participants in the fuel cell pioneer campaign resemble, with some modifications, the latter group. Due to peculiarities of the recruiting process, they are almost exclusively home owners (131 of 142) of a more rural and, in terms of lifestyle, traditional sample than the PV pioneers: almost all are married, about 20 % live in villages with populations of less than 5,000, with almost another 50 % living in small towns with 5,000 to 20,000 inhabitants. But, like the PV users, they are of an educated highincome strata. Almost 20 % have a net monthly household income of more than 4,500 EUR. In the representative ALLBUS sample (average Germans over 18), this group makes up only 11 %. However, the high household income does not necessarily translate into a high per capita income. The fuel cell pioneers are not only especially well off, they also have especially big families. In their average household, there are 3.15 people, as compared to 2.59 in the general population. That means that the additional income must also feed additional people. It is, then, not so much an indicator of a high level of disposable funds, but rather of social status.

5 6 7

Of the 142 respondents of the postal survey, only 7 were female. There is no information about education in Greenpeace (1996). The only exception is the study by Reif (2000) mentioned in footnote 4.

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Figure 6.1 illustrates fuel cell pioneers’ education levels. As they are almost exclusively male, and because in their generation, education is gender-related, their school degrees are compared to degrees of the male part of the ALLBUS sample. The dark-shaded section shows the highest degree available at German schools, Abitur or Fachabitur (high school graduate; 12-13 years of schooling). The middle section shows an intermediate degree (Mittlere Reife, 10 years of schooling), and the light section the lowest degree (Hauptschule, 9 years of schooling). Figure 6.2 shows the fuel cell pioneers' vocational training8 and current job position. The numbers indicate the frequency of mention (multiple answers were possible). It is apparent that many of the pioneers have technical training and/or work in a technical profession – and also, that many of them are already pensioners, corresponding to their relatively high ages. How can the findings be interpreted? The striking fact that the sample is almost exclusively male will be discussed below, when motives are presented. The educational and professional difference between owners of different technologies found in the literature evokes some considerations that might also be relevant for different types of micro cogeneration. missing 5,6%

(Fach-) Abitur 47,9%

Hauptschule 21,8% Mittlere Reife 24,6%

Pioneers

missing 0,1%

other 1,0%

still at school 1,2% none 2,3%

(Fach-) Abitur 31,1%

Hauptschule 34,9%

Mittlere Reife 29,4%

ALLBUS sample

Fig. 6.1. Education of fuel cell pioneers compared to a representative (male) sample

8

In German social science surveys, “vocational training” includes all higher education beyond school that qualifies one for a job, including university education.

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cr a

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fts m te an ch co nic a m m l er ed cia uc l a jo tion u ad rna he lis m m al i th nis / s tra t oc io n ia lw or k ot he r

Frequency

6 From Consumers to Operators: the Role of Micro Cogeneration Users

Current job positions

Fig. 6.2. Vocational training and current job positions of fuel cell pioneers

We suspect that solar thermal collectors (as well as biomass), in comparison to photovoltaics, are perceived as rather low-tech applications. They therefore address “Do-It-Yourself” individuals and attract users with technical and manual skills who may perceive the mounting and maintenance of the system as a hobby. Photovoltaics has a high-tech image, is expensive and, without state support, not economical. It is therefore easily perceived not to be a technology for broad application, but a hobbyhorse of technology nerds or environmentalists. It may therefore appeal rather to people with “green” political orientation, post-materialistic values, specialised technical interests, or to individualists willing to take risks. These groups can traditionally be found in the academic, highincome strata. The same argument may hold for fuel cell micro cogeneration – and more so, because it is even less well known and has not been tested extensively in practice. In the following section, we will reveal some further evidence for this hypothesis. In contrast to fuel cells, reciprocating engines are an established technology that seems feasible and economically sound. Micro cogeneration based on such engines may therefore rather appeal to similar groups as biomass and solar thermal collectors. Stirling micro cogeneration, being a rather old but not too well-known technology, is likely to be found somewhere in between.

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6.3 Attitudes In the fuel cell micro cogeneration study, we explored pioneers’ attitudes on technology and the environment. Furthermore, we investigated their interest in social and political affairs, because we suspected that their interest in a technology perceived to be innovative and environmentally benign might be related to a broader interest in social progress. We will discuss the various issues in turn, focussing on the results of the postal survey. Focus group results are generally in line with them and back the findings. 6.3.1 Political Attitudes One initial result is that the pioneers indeed show a keen interest in the community, both at a local level and with respect to “big politics”. 21.3 % do volunteer community work between once a week and once a month (as compared to 11.3 % in the male part of the ALLBUS sample), 31.9 % do it between once a day and once a week (as compared to 20.2 %) and 5.7 % do it even on a daily basis (as compared to 4 %). The pioneers also report high levels of political activism.

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Fig. 6.3. Political activism of fuel cell pioneers. Activities are: voting in an election, being an active member of a citizens’ advocacy group, being an active member of a political party, taking part in a legal demonstration, refusing to vote (as a method of expressing protest), voting for a party one would normally not consider (as a method of expressing protest), and signing a petition

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Figure 6.3 shows the percentages of that report having taken part in various types of political activism at least once, again compared to the male part of the ALLBUS 2002 sample. It turns out that the pioneers have performed every action more often than the male members of the ALLBUS sample, with the single exception of vote boycotts. Apparently, they feel an obligation to express their political views via voting. All differences are significant at a 0.05 level. To summarize, the pioneers evoke a picture of persons with a keen interest in public affairs, rooted in the community, and willing to do their share for the common good, but also to stand up for their aims and interests. Focus group members confirm this view: among them were mayors, school directors, and leaders of local industry or craftsman associations. 6.3.2 Technology Attitudes As expected on the basis of their professions, the pioneers also have a positive picture of technology, and feel competent in dealing with technical issues. Table 6.2 shows their responses to several technologyrelated items, to be rated on a scale of 1 to 7 (1 equals “fully disagree”, 7 “fully agree”). The pioneers’ mean responses are compared to the means of a representative sample of the population, surveyed by the Institute for Technology Assessment and Systems Analysis (ITAS) (Hocke-Bergler and Stolle 2003).9 Significant differences have been highlighted in grey. An interesting pattern shows up. The pioneers do not differ much from the general population in assessing the blessings of technology. With the exception of the item “Technology is the basis of our living standard”, they are very close to the ITAS sample on all positive items. However, they differ significantly when it comes to judging risks and disadvantages of technology. The pioneers are much less cautious than the general population, detecting few risks and problems in “modern technology”. The pioneers also score high in a test measuring subjective technical competence, that is, the confidence in one’s own ability to solve technical problems. The short version of the KUT test (Kompetenz im Umgang mit Technik, meaning “technology-use competence”; Beier 1999) comprises eight items, such as “Usually, I cope with technical problems successfully”, to be rated on a scale from 0 (“fully disagree”) to 5 (“fully

9

Unfortunately, the data does not allow us to differentiate for gender in this case.

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Table 6.2. Attitudes of fuel cell pioneers towards technology Item

Pioneers ITAS 2003 Technology is the basis of our living standard 6.04 5.56 Technology inevitably leads to pollution 3.09 4.08 Technology simplifies everyday life 5.81 5.78 Technology needs stricter control 4.70 5.09 Without technology, everyday work could rarely be 5.72 5.67 mastered Technology is opaque and menacing 2.37 3.50 Without technology, life would be more humane 3.07 3.61 Technology enslaves people 3.13 3.79 Technology makes life more comfortable 6.03 5.84 Today, technology is used without investigating its 4.26 4.23 consequences properly Technology helps to prevent catastrophes (plagues, 5.18 4.92 famines) Technology endangers humankind and the 2.90 3.43 environment Technology is needed for the survival of a growing 5.35 5.34 world population 1 = “fully disagree”, 7 = “fully agree”.

Signif. (T-test) .006 .000 .839 .049 .766 .000 .017 .004 .149 .879 .189 .006 .944

agree”) with the maximum score being 40. The pioneers show an unusual pattern. Of the 142 respondents, 130 score more than 20, 72 (that is half of them) more than 30 and 37 (about a quarter) even more than 35. The mean score is 30.54. Unfortunately, information about a representative sample is not available for comparison, but the sample of test persons used in constructing the test shows a mean score of only 26.8 (Beier 1999, p. 690).10 6.3.3 Environmental and Energy Attitudes A third dimension of interest was attitudes towards the environment and energy. Table 6.3 shows a comparison of environmental attitudes between the pioneers and a representative German sample studied in 2002 (Kuckartz and Grunenberg 2002). The items were rated on a scale from 0 (“fully disagree”) to 4 (“fully agree”). Again, significant differences are highlighted in grey. 10

The original score is 34.8 because a scale of 1 to 6 was used while in our survey, for consistency reasons, a scale of 0 to 5 was employed. Transposed to a 0 to 5 scale, a mean of 26.8 emerges.

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Table 6.3. Environmental attitudes of fuel cell pioneers Item

Pioneers Kuckartz Signif. and (T-test) Grunenberg 2002 2.72 2.84 .327

Even today, most people still do not act very environmentally concious. People like me cannot do much for the 1.31 1.99 .000 environment There are limits to growth that our 2.66 2.56 .528 industrialised society has already reached or will soon reach. The environment should be protected even if 2.11 1.83 .069a it means a loss of jobs. Science and technology will solve many 2.08 2.05 .841 environmental problems without us having to change our lifestyle. Most products of science and technology 1.29 1.79 .000 damage the environment. If we go on like this, we are approaching an 2.38 2.51 .443 environmental catastrophe It worries me to think about the environmental 2.34 2.69 .025 conditions our children and grandchildren will have to face Media reports about environmental problems 2.32 2.53 .150 often fill me with outrage Even today, politicians do by far too little for 2.61 2.76 .293 the environment In my opinion, many environmentalists 1.56 2.30 .000 strongly exaggerate the significance of environmental problems 0 = “fully disagree”, 4 = “fully agree”. a The difference becomes significant (.048) if a Mann-Whitney-U-test is employed instead of a t-test.

It becomes clear that the pioneers take environmental problems seriously. They strongly reject the notion that environmental problems might be exaggerated, and even tend to consider the environment to be more important than jobs. However, they do not react to the problem emotionally. In the item expressing worry, they score lower than the general population. A possible reason is that the pioneers have high confidence in their own ability to contribute to a solution. The item “People like me cannot do much for the environment” is rejected categorically. And of course, the pioneers would never assign science and

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technology a role in creating the problem. Survey participants do not appear to be more enthusiastic about the potential of science and technology to solve environmental problems than the general population. In the focus group discussions, however, this idea was expressed clearly. To the pioneers, what was technically advanced was also environmentally benign. Both notions often melted in the notion of Zukunfts(weisende) Technologie, maybe best translated as “forward looking technology ”or “technology of the future”. Our picture so far is that the pioneers care about the environment, have a positive view of technology, and think they can contribute to solving environmental problems as well as dealing competently with new technology. So we might conclude that they themselves take measures to protect the environment and that technology plays an important role in those measures. We have explored this idea by examining examples of self-reported environmental behaviour and of investment in “green” technologies, focusing on energy. Figure 6.4 shows self-reported environmental behaviour in the energy domain, as compared to the Kuckartz and Grunenberg sample.11 Pioneers

98 87

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Self-reported behaviour does not exactly mirror real behaviour, but assuming that the rate of misreporting is about the same in both samples, the comparison is instructive.

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The actions examined were: purchasing Green Power, buying efficient household appliances, willingness to pay more for such appliances, and number of energy-saving lamps in the household. We can see that the pioneers rate better than the general population on any of these items, though the differences do not become statistically significant in the Green Power case. In the other items, significance is at the 0.01 level. Furthermore, it is evident that the pioneers have already invested in various environmentally sound technologies (Fig. 6.5). This does not only demonstrate their willingness to invest in “green” technologies. What is more, these “trigger technologies” provide them with some experience and knowledge, lowering the threshold for considering an innovative technology like fuel cells. The role of knowledge is confirmed by the fact that many of the pioneers have actively sought out information on different energy- and environment-related issues (Fig. 6.6). Most have done so before learning about the field test, but learning about it has spurred additional interest, especially in fuel cells. 100

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W in do W w in C a s C eilin l l i n ula on g su tio d in l a n W Fens su tio as ri in lat n hi dg g b io n e o n R g m cla ile B ain . c ss r Soiom wa las A la as te s A r s r Fr he he us So ee at at e D la ze (w in is r r a g h w a c te a rc la r) So shehite ss la Ph r c ctu A r h o la r e ea tov ss o H ea t (h lta A t p Gr ea ics H T um ee tin e u n g O at p mb p ( ro ) t h u le w o er m r c at f de p ( la er) vi he ss ce a A cl ting as ) s O A th er

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No. of respondents having dealt with the topic

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Fig. 6.6. Active information on energy technologies before and after learning about the fuel cell micro cogeneration field test

6.3.4 Conclusions on Attitudes Now, what have we learned about the pioneers so far? Results about pioneers’ attitudes fit well with the hypotheses drawn from their sociodemographic profile. Obviously, they are people with an interest in community affairs and in the environment. They are positive that existing problems may be solved, particularly with the help of new technology, and they are willing to contribute their share to the solution. Their enthusiasm about technology means that this kind of contribution is not perceived as a sacrifice, but rather contributes to personal fulfilment. In the next section, we will deal with the pioneers' relationship to their respective energy technology and see whether this fits the picture sketched here. We will look at the events that prompt them to become interested in an innovative energy system, at the reasons they give for showing an interest, at requirements they think such a system must fulfil and at their opinion on whether their system meets those requirements.

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6.4 Motives, Goals, and Interests 6.4.1 Reasons for Considering Fuel Cell Micro Cogeneration Our literature study shows that innovative technology users report mixtures of different motives. Among them are: independence, interest in the new technology and a desire to promote it, the wish to help the environment, and economic benefits. But as much as the general set of motives is constant, just as much does their relative importance differ. Sometimes environmental motives are most prominent; sometimes it is independence or technical interest. Economical motives, however, are never primary. The differences are probably to a great extent due to methodological reasons. The studies analyzed word questions differently, present different sets of answers to choose from, pose them in different order, and elaborate topics in different detail. The fuel cell micro cogeneration study helps to clarify some of these aspects with respect to micro cogeneration. Survey participants were asked in an open question about their reasons for considering the fuel cells; the answers were categorized later. Figure 6.7 shows the results.

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en sa vir co vi on st ng m in de n ad en ent pe ew va erg nd te nta y en ch ge ne ce no s ed fro log ed m y ne o w o il pr he the od a r u su ce re ting pp s e lia or le bili t s ctr ty ch ici em ty es

0

Fig. 6.7. Reasons for considering a fuel cell micro cogeneration as a home heating system

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We can see that environmental protection (comprising answers like “environmental protection”, “lowering emissions” or “protecting resources”) is by far the most frequent motive, followed by energy saving (including energy efficiency), cost considerations, and interest in the technology. The desire to save energy, by the way, is a hybrid motive; it can stem both from environmental and from economical reasons. A similar picture emerges from the focus group discussions. Technical interest is inseparably interwoven with an interest in everything “new” and “forward-looking”. Interviewees state that they are “open for everything that’s new”, they want to “be in on the ground floor with this technology”. For this purpose, they are willing to invest some money and incur certain risks. Fuel cell systems attract them because they are perceived as especially modern in comparison to other generation techniques. Visions articulated in this context dealt with a hydrogen economy, import of solar hydrogen from desert areas, and self-sufficient home systems based on a combination of fuel cells, photovoltaics, and hydrogen storage. Interviewees have an optimistic outlook, assuming that technology will solve environmental problems. At the same time, new technologies are expected to be more “efficient” and “economical”, thus linking environmental and economic benefits. As one participant put it: “It is my aim to rearrange the building in terms of optimum [energy] use. Better heat supply and heat insulation – a combination of solar thermal water heating and a fuel cell would be ideal. Later, this could be combined with photovoltaics, and I’d achieve some form of self-sufficiency.”

Other than we supposed for the PV users in the literature, but similar to the suspected motives of the biomass and solar heat users, technical interest of focus group members mixes with a desire to “do it yourself”, to “tinker” with one’s home energy system. Such systems are perceived as a space for self-actualisation: “Home technology provides room for creativity. It is something you can shape, you can unfold your talents on, find solutions. It’s not only ‘It’s working, and that’s all I’m interested in’. No, I want to be ahead, find better solutions than others.”

6.4.2 Requirements for Home Energy Supply So far, the results fit into the picture of the environmentally concerned and technologically enthusiastic citizen. However, there are also contrasting findings. We asked survey participants which aspects generally they find important when thinking about their home energy supply. They were given

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various choices, each to be rated on a scale from 0 to 4 (0 = not important at all, 4 = very important). When respondents are confronted with such a general question which not explicitly mentions fuel cells, the picture changes dramatically (Fig. 6.8 shows the mean rating of the various items). 4,5 4 Mean

3,5 2,72,7 2,8 2,8

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to ne be p e a su rod ds pi pp uc litt on or es le ee di t d e sp r ffu om lec ac si on es tric e t. ity ne l w o ec lo te w on w c no . ca hn is o e ea pita log ow sy l c y n ind to os in e m ts te p o re en u tru st de nt se st in nc c in te e go urit su chn o d y o pp . lo ro f su lie w o p r m m pl ai cl y n i cl us ten ma im e a te at r-f nc e rie e lo w lo pro ndl o w te y en per po ctio er ati llu n gy on tio ef co n fi c s t ie s re nc lia y bi lit y

1,5

Fig. 6.8. Pioneers’ requirements for home heating systems. 0 = “not important at all”; 4 = “very important”

Suddenly, reliability, energy efficiency, and low operation costs become the main concerns. The environment ranks thereafter, and to “own an interesting technology” or “support the diffusion of new technologies” follow much later. How can we explain this apparent incoherence? To answer this question, we will first have a look at some additional information: opinions on fuel cell performance and further results from the focus group discussions. After voicing their requirements for home energy supply, respondents were given the same set of items and asked how well the fuel cell micro cogeneration fulfilled them in their opinion. Figure 6.9 gives the results, again presenting the mean rating of each item, which had been rated on a scale from 0 (“does not fulfill the requirement at all”) to 4 (“fully fulfills the requirement”). According to Fig. 6.9, pioneers see the fuel cell micro cogeneration plant’s strength in the domains of environmental benefits and innovative technology. In contrast, performance with regard to “practical” concerns like user-friendliness, reliability and low maintenance as well as cost aspects is judged rather sceptically.

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4,5 4 Mean

3,5 3 2,5

2,3 2,42,4

2,62,6 2,72,7

2,8

3 3 3 3 3 3

3,2 3,3

3,43,4 3,5

2 1,7

lo w ne ca ed pit s al e l it co lo as tle s sts l w y su ow m to pac pp op ain m e or er te oun t d ati na t om on nc es co e t. st in r eco s e de l n se u pe iabi . cu se nd lity rit r-f en tru iy o rien ce s fs d to t in up ly be su ply pr a pp od p lie di u l ffu g ce ow ion r si oo s n ee on d el o r ne roo ect ise en w t m ricit er ec cli y ow clim gy hno ma n a eff log te in te ici y te p en re ro c st te y lo in t ctio w ec n po hn llu . tio n

1,5

Fig. 6.9. Expected performance of fuel cell micro cogeneration. 0 = “does not fulfill the requirement at all”; 4 = “fully fulfills the requirement”

This is a realistic picture. In fact, fuel cell CHP systems promise a good environmental record. However, they still have a long way to go to become fully operational. At the moment, the prototypes do not yet function reliably, there are problems with the installation due to the size of the devices, and production and maintenance costs are prohibitive. These problems were also reflected by the focus group participants. In spite of their sweeping technological visions, they also feared failures due to the immature stage of the technology and, in exchange for their willingness to contribute, demanded that they be protected from economic and technological risk. What is more, there was general agreement that new solutions needed to become economically feasible in the long run. Interviewees did not demand high financial returns, but required that the investment had to “pay off” after some time. They were also aware that aversion to risk as well as economical considerations are even stronger in the group of mainstream users. They voiced clearly that, in order to win a mass market, fuel cells must become more reliable and, first of all, much cheaper: “It is a small, idealistic minority who think like [us]. Most people think differently. The system needs to pay off after 10, 12 years – otherwise it won’t succeed.” “I’d like to comment on the topic ‘convincing other sections of the population’. In my case, one part of that population was my wife! Women have a more

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practical perspective. [...] She has doubts about new developments which pose a certain risk – because you don’t want to install a new heating system every few years!”

The last statement points to the importance of the gender issue. Being responsible for the household’s functioning, the family’s well-being, and usually lacking the technological enthusiasm of their male counterparts, women with a traditional socialisation are definitely more difficult to reach if a new technology suggests possible inconvenience, hassle or even failures, threatening to leave the family in the cold. In this light, we can interpret the seemingly contradictory results (Fig. 6.7 vs. Fig. 6.8). Like everybody, the pioneers have some very practical, down-to-earth requirements for their heating system. It needs to work reliably, provide comfort, and be economically feasible. On the other hand, they are well aware that fuel cell CHP is a novel, experimental technology. Because of their keen technical interest and their environmental concern, they would like to give it a chance. They are willing to contribute to the experiment as long as they are protected from the biggest risks. However, this does not mean they are willing to accept high costs or unreliable quality for the sake of the environment once and for all. They expect that fuel cell development will advance, and that the deficits will be remedied. 6.4.3 Micro Cogeneration Technologies in Comparison How about other micro cogeneration technologies? Which arguments can be brought forward in favour of them? Do they differ from the arguments for fuel cells – and in which respect? Are more established micro cogeneration technologies like reciprocating engines better suited to accommodate users’ needs? To find out about these questions, focus group participants in the three applicant groups were asked to rank different technologies for the provision of heat and electricity services with respect to which of them they would most like to invest in. They were also requested to give reasons for their ranking. Heat and electricity production technologies were ranked separately, with micro cogeneration present both on the heat and on the electricity side. Three micro cogeneration technologies were included (fuel cell, Stirling engine and reciprocating engine) which had been introduced to the participants in a brief presentation prior to the ranking task. The resulting picture is quite mixed. The rankings constructed by the three discussion groups differ, the only commonalities being that solar technologies (photovoltaics and solar heat) generally rank relatively high, and purchasing “green power” from the grid always ranks lowest. The

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three micro cogeneration technologies are always close together, somewhere in the middle, differing in their exact rank. However, as the exact ranking result is very much dependent on group dynamics and on the amount of information present in the specific group, what is more important are the various arguments and evaluation criteria brought forward and discussed by group participants. Some of these arguments were similar in all three groups. Differences emerged due to both the relative weight group members gave the various criteria and different perceptions as to what extent the technologies would meet those criteria. Rather than contradicting each other, the various arguments each add additional aspects, so that a consistent picture can be constructed. All micro cogeneration technologies generally were viewed as being energy efficient, which positively influenced their ranking. With regard to other aspects of environmental performance, feelings were mixed. They were criticized for still running on fossil fuels, which made them less attractive than solar technologies. Therefore, it was seen as a positive vision for the future to run a Stirling engine on renewable energy sources or a fuel cell on hydrogen. The reciprocating engine performed worse in this respect. Furthermore, it was seen as “dirty” in operation, probably also loud, and old-fashioned. On the upside of that “old-fashionedness”, however, participants regarded it as an approved and reliable technology. One of the core criteria, and more so than in the survey, was independence. Independence primarily meant control over one’s own energy supply. One aspect was independence from the grid. Technologies that allow the storage of fuels at home or solar technologies were therefore favoured (which also meant that oil was preferred over gas). Micro cogeneration’s performance in this respect depended on the fuel used. Another aspect was independence from fossil fuels, which were seen as subject to shortages and price fluctuations. This aspect privileged woodpellet heating and solar technologies over most micro cogeneration. However, fuel flexibility was seen as a clear asset of the Stirling engine. Finally, independence also meant control over how one’s energy is produced. Participants desired to verify potential ecological benefits and efficiency gains themselves. Therefore, all micro cogeneration technologies were preferred to green power from the grid, which encountered much distrust. While solar technologies ranked better in environmental performance and independence, their supply security and their ability to completely meet energy demand was doubted. They were therefore seen as “additional” technologies, which could gainfully be combined with micro cogeneration.

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Finally, practical considerations and cost arguments were discussed. Among the practical considerations were lack of space for fuel storage (which might, in contrast to the arguments discussed above, benefit gridbound technologies) and the size of the device, which at the moment is a problem for the fuel cell. As to prices, no clear advantage for one or the other system was found, which was also due to lack of information.

6.5 The Pioneers as Multipliers The role of a pioneer is not only to be the first in testing a new technology, but also to support its further diffusion. Can we expect this kind of pioneer to be available for micro cogeneration? Positive hints come from the literature on renewable energy pioneers. Virtually all participants in all studies are highly satisfied with their systems. Satisfaction is even higher when participants monitor their own system, receiving detailed feedback on its performance. Given the fact that the innovative energy systems were actively sought out by the users, we assume that satisfaction stems from having realized personal goals and aspirations, and from observing the positive environmental and, at times, economic effects of this realization. Therefore, we assume that micro cogeneration users will also be satisfied, provided the systems work reliably. This satisfaction could make them successful multipliers. Satisfaction was explored in the fuel cell micro cogeneration study via the focus groups, both with applicants and with actual users. During the group discussion, applicants got the opportunity to see a micro cogeneration system in action and get up-to-date information on its state of development, so they could make an informed judgement. Both applicants and users were indeed generally satisfied. However, they showed some disillusionment about the system’s technological maturity. Some applicants had hoped to be able to buy a fuel cell-based micro cogeneration system in one or two years via mainstream sources, not knowing that there are still a number of technical difficulties to overcome and that the product will certainly not go into mass production within this decade. Nonetheless, pioneers were interested in helping to diffuse the technology. In the focus groups, a desire for showing and explaining the technology to others was voiced over and over again. Teachers wanted to show their students; craftsmen articulated they would like to set up informational events for their colleagues. The pioneers welcomed the oportunity to discuss in the focus groups, and demanded from the energy

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supplier to “go public” much more strongly; some focus group members teamed up and started drafting a PR campaign. As one member put it: “I look at my solar thermal panel every day. It would be the same with that [fuel cell] system. I’d tell everybody: ‘Hey, come on, look, I show you something.’ ”

In the postal survey, 26 % claimed to be “very interested” and 44 % to be “interested” in passing on information and showing their fuel cell to others, if they had one. Only 2 % were “not very interested" and another 2 % "not interested at all”. However, pioneers do not want to simply promote the technology any which way. They consider it important to provide fair and realistic information, pointing out advantages and disadvantages. They deem it necessary to accurately inform the public about the state of development in order to avoid raising false expectations.

6.6 Uncertainty as a Barrier So far, we have identified motives of pioneer users and evaluated their potential of aiding diffusion. However, it is also important to identify potential barriers that may inhibit adoption and diffusion. A substantive barrier identified in the literature is uncertainty about the reliability and maturity, and also about the cost and profitability, of technologies. These problems are reflected in the fuel cell micro cogeneration study. Many respondents had difficulties assessing how well the fuel cell might perform in relevant areas. About one third marked “don’t know” for each of the following items: reliability, user friendliness, ease of mounting, and need of maintenance. About 25 % “don’t know” about operation costs. Focus group members feared immaturity and possible “teething troubles” of the systems. They expected frequent failures and need for repair, and were sometimes concerned about safety issues. Though they were willing to incur a certain degree of risks, they did not want to function as “guinea pigs”. The uncertainty of costs also seems deterring. People cannot assess either investment costs or operation and maintenance costs and, therefore, find it difficult to soundly calculate whether the installation may be economically feasible. For reciprocating and Stirling engine CHP systems, we expect these concerns to be less pressing. What strategies can help to overcome such uncertainties? First and foremost, reliable information is crucial. A second helpful tool to protect users from financial and technical risks is a contract arrangement with a contractor bearing the financial risk and guaranteeing heat and power

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supply for an agreed-upon price. Focus group members welcomed such a contracting system for the development and testing phase. It was particularly appreciated that, in their case, the contractor was a wellknown, sizeable, and reputable energy supplier. However, with few exceptions they hesitated to accept contracting in the long run. Once the system is mature, most interviewees preferred to own it themselves. Ownership is an important dimension of the independence that is sought. Thirdly, financial risks could be eased by support schemes. A substantial number of the users described in the literature claimed they would have installed their system even without any support programmes. But even for them, public support schemes played a significant symbolic role, honouring their initiative and willingness to take risks and emphasizing that they are using a promising technology in which investment is worthwhile. Users favoured a combination of investment subsidies and feed-in bonuses. The topic was not studied in the fuel cell micro cogeneration study because the development stage of that technology is too young to draft support schemes. Nonetheless, the concerns found in analogous cases should apply to micro cogeneration as well.

6.7 Summary and Conclusions: Pioneers for Promoting